What is USD/JPY?
Updated on August 24, 2026 · by Alex
USD/JPY is the exchange rate between the US dollar and the Japanese yen: how many yen it takes to buy one dollar. If it trades at 150, one dollar costs 150 yen.
In a currency pair, the first one is what you buy and the second is what you pay with. If the number goes up, the dollar is getting stronger and the yen weaker; if it goes down, the opposite is happening.
It is one of the most heavily traded pairs in the world, along with the euro-dollar.
For two reasons that go well beyond Japan.
The first: the yen is a safe-haven currency. When there is global panic, money tends to move into the yen and the pair falls. A sharp move down is often an early sign of risk aversion that only shows up in stock markets later.
The second is the carry trade. For years Japan kept interest rates near zero while other countries had them much higher. That made a very widespread trade possible: borrow in yen almost for free, convert into another currency and invest where the rates were better. It works as long as the yen stays stable or weakens.
The problem is what happens when it turns around. If the yen strengthens suddenly, everyone who put on that trade has to unwind it at the same time: they sell what they bought in order to buy back yen. That chain reaction can drag down markets that have nothing to do with Japan, and it has happened more than once.
Thinking the pair only matters to people who invest in Japan. A sharp move in the yen can move stock markets all over the world through the carry trade, without a single one of the affected companies doing business in Japan.
The second mistake is forgetting that an exchange rate is a relationship between two currencies. USD/JPY going up can mean the yen is weakening, the dollar is strengthening, or both. To tell the difference you have to look at the dollar index.
