Japan Is Still a Haven, But It’s Tougher to Make a Buck on the Yen
A classic way for investors to trade on global anxiety isn’t paying off the way it used to.
On the morning of Friday, May 31, when traders in Asia started their day with an unexpected move by President Donald Trump to impose tariffs on Mexico, there was one seemingly obvious course: Rush into the yen.
Buying Japanese currency when the rest of the world looks wobbly is a classic trade. Japan’s current-account surpluses and its holdings of everything from U.S. Treasuries to foreign real estate mean it doesn’t need to borrow from anybody. Investors, including those in Japan who have accumulated overseas assets, are confident about parking money in Japanese bank deposits or government bills when they want to ride out a storm. That, in turn, is good for the value of yen. And going into yen is an easy trade to make: Dollar-yen is the world’s second-most-traded currency pair, after euro-dollar, making it extremely liquid.