Yen Reaches 7-Month Peak: Will KRW/JPY Hit 1,100?

# Japanese Yen Rises Above 1,000 Won Amid Global Market Shifts The Japanese yen has climbed past the 1,000 won threshold, positioning itself as a safe haven amid mounting fears of a potential U.S. recession spurred by the Trump administration's tariff policies. As anxieties about global economic slowdowns intensify, investor interest in the yen has surged, propelling it to its strongest position against the U.S. dollar in seven months. In contrast, the South Korean won has faltered, influenced by the ongoing U.S.-China trade conflict's repercussions. Experts predict the yen will maintain its upward trajectory, while the won will face increasing downward pressure due to South Korea’s sluggish growth prospects and potential interest rate cuts by the Bank of Korea. This trend could push the KRW/JPY rate to heights reminiscent of 2020, potentially reaching around 1,050 won by the year's end. # Yen Strength and Weak Won Drive Exchange Rate Surge As of April 21, the KRW/JPY exchange rate stood at 1,007.7 won per 100 yen, according to Bank of Korea data. This marks a significant rise from the high-800 won range reported just a year ago. The won/yen rate surpassed the 900 won level last July and has continued climbing, crossing the 1,000 won mark earlier this month. The recent surge in the KRW/JPY rate is attributable to both a strengthening yen and a weakening won. The yen's reputation as a safe-haven asset has grown, driven by fears of a U.S. economic slowdown following aggressive tariff measures under President Donald Trump and subsequent retaliations from China. Fueling the yen's strength are expectations that the Bank of Japan (BOJ) may incrementally raise interest rates, reversing its long-standing negative rate policy. Additionally, President Trump’s comments linking Japan's export surplus to a weakened yen have sparked speculation about the currency's potential rebound. Earlier this year, the yen was around 160 yen per dollar. It has since appreciated rapidly, recently hitting 140.55 yen per dollar—the strongest level since mid-September 2022. # South Korean Won Faces Persistent Headwinds Conversely, South Korea’s won has been under pressure due to concerns over stagnant economic growth. As an export-reliant economy, South Korea is particularly vulnerable to the fallout from the U.S.-China trade tensions. The prolonged conflict between its two largest trading partners remains a significant risk for the South Korean economy. Leading international banks have raised alarms over South Korea’s growth outlook, with some projecting the country’s GDP growth to fall below 1% this year. Goldman Sachs has identified South Korea as one of the nations most exposed to tariff risks in Asia. “Dollar weakness, coupled with safe-haven demand for the yen, has created an imbalance in the FX market,” said Choi Ye-chan, a research analyst at Sang Sangin Securities. “Meanwhile, the won, often seen as a high-risk currency, has been losing ground, leading to the rise in the KRW/JPY rate.” # Market Expectations on Yen Strength and KRW/JPY Exchange Rate Market consensus suggests that the yen will sustain its strength in the medium to long term, driving the KRW/JPY rate higher. Goldman Sachs forecasts that the BOJ’s gradual interest rate hikes could cause the USD/JPY rate to fall to 135 yen by year-end. Choi further indicated that the yen has additional room for appreciation, which would likely push the KRW/JPY rate even higher. “By year-end, the USD/JPY rate could fall to 138 yen, with the KRW/JPY exchange rate hovering between 1,000 and 1,050 won,” he explained. Similarly, Lee Jung-hoon, a research analyst at Eugene Investment & Securities, echoed this sentiment. “Funds exiting the dollar are increasingly flowing into the yen,” he stated. “While the yen's rapid appreciation may seem excessive in the short term, the KRW/JPY rate could drop below 140 yen and settle around 1,020 won by year-end.” As global market dynamics shift under the weight of trade tensions and recession fears, the yen continues to strengthen its position as a key safe-haven asset, while the Korean won grapples with economic uncertainty.