Samurai Meets the Krona: Why Japan’s Yen Is Losing Its Nordic Edge
In the world of currency, the last three months have been harsh for the yen’s duel with the Swedish krona. JPYSEK has slipped by 4.5%, and behind this seemingly simple number is a story of two economies moving to very different rhythms.
Monetary Contrasts: The Art of Standing Still
Japan’s central bank has tiptoed into a new era, but the moves have been more kabuki than karate. The Bank of Japan’s (BOJ) overnight rate still hovers at 0.5%, after its historic March 2024 exit from negative rates and a tentative start to quantitative tightening. But inflation, after a brief flare above 3.3% in mid-2025, is showing signs of fatigue—July’s all-items CPI was a mere 0.8%, its lowest point since late 2024. Despite core CPI holding above the BOJ’s 2% target, policymakers remain cautious, unwilling to risk choking off fragile growth with aggressive tightening.
Meanwhile, Sweden’s Riksbank stands its ground. With a policy rate targeting 2% and a current account surplus of 119.3 bn SEK in Q1 2025 (up by 34.3 bn SEK year-on-year), the Swedish economy radiates resilience. The krona’s backers see a central bank with room to maneuver and a trade engine running at full steam.
Yield Spikes and the Carry Trade Unwind
Japan’s government bond market has not been quiet. The 30-year JGB yield soared 100 basis points to 3.25% in July 2025, its highest in decades. Yet instead of strengthening the yen, the spike was a symptom of investor nerves: global risk-off flows, a narrowing yield gap with US Treasuries, and the sense that BOJ’s support is waning. Japanese life insurers dumped 1.35 trn yen of JGBs in early 2025, and the yen suffered as capital sought safer, higher-yielding pastures.
Energy Imports: The Unseen Burden
Japan’s dependence on imported energy has left it exposed. Despite a rebound in crude imports in July, the trade deficit ballooned to ¥637.6 bn (about $4.4 bn). Oil prices topping 10,500 yen/barrel and a persistently weak yen mean every tanker docking at Yokohama chips away at Japan’s current account. The BOJ’s reluctance to move fast is partly rooted in this energy exposure; aggressive tightening could strengthen the yen but stifle the recovery.
Krona’s Quiet Confidence
Sweden’s numbers paint a different portrait. A Q1 2025 trade surplus of 101.7 bn SEK, robust primary income, and a services balance now deep in the black provide ballast for the krona. Even as net external assets dipped by nearly 1 trillion SEK (reflecting global volatility), the domestic engine kept humming. Exports rose by 22.4 bn SEK year-on-year, while imports grew just 8.9 bn SEK, signaling persistent demand for Swedish goods abroad.
Geopolitics and the Risk-Off Shuffle
The backdrop is anything but tranquil. Middle East tensions, US–China rivalry, and Trump-era tariffs remain potent forces. The CFTC’s Commitments of Traders reports confirm speculative yen positions remain bearish, as portfolio managers brace for more global volatility. When anxiety rises, the yen’s historic safe-haven status is now contested by the dollar, euro, and even the Swiss franc—leaving the yen with less “insurance” bid.
Yen’s Dilemma: Not Weak Enough to Help, Not Strong Enough to Lead
The result? A yen caught between two worlds: too weak to curb import inflation and too strong to revive exports in a world of fractured supply chains and tariff walls. The JPYSEK’s 4.5% decline is as much about the krona’s quiet strength as it is about the yen’s existential drift. With Swedish fundamentals steady and Japan’s policy in limbo, the FX market is simply following the script written by macro divergence, yield anxiety, and a global appetite for certainty.
In this duel, the samurai’s blade is dulled by hesitation, while the krona sharpens its edge on trade and stability. For now, it’s Stockholm over Shibuya.