Description
The USD/JPY exchange rate reflects the amount of Japanese yen (JPY) required for one unit of U.S. dollar (USD). The USD/JPY exchange rate is influenced by factors such as the monetary policies of the U.S. Federal Reserve (Fed) and the Bank of Japan (BoJ), global economic trends, trade balances, and investor sentiment toward risk.
A lower USD/JPY exchange rate indicates a stronger yen, which can reduce Japan’s import costs but may weaken its export competitiveness. Conversely, a higher USD/JPY exchange rate reflects a weaker yen, typically supporting Japanese exports but increasing import costs.
Additionally, due to Japan’s prolonged low-interest-rate environment, the yen is often a popular currency for carry trades. Carry trades involve borrowing in a low-interest-rate currency and investing in a higher-yielding currency to profit from the interest rate differential.