When the Yen Met the Swiss Wall: Anatomy of a -16.7% Slide

For three months, the yen has been on a collision course with the Swiss franc—and the result is written in the numbers: JPYCHF down -16.7%. What just happened to one of the world’s classic safe-haven pairs?

How the Bank of Japan Broke Its Own Spell

For a quarter-century, the Bank of Japan (BOJ) held the yen in a trance of near-zero rates, negative policy, and relentless bond-buying. But 2025 has been the year of awakening. In January, the BOJ hiked its overnight rate—ending the era of negative interest rates. By July, policy rate stood at 0.5%. Quantitative tightening accelerated, with the BOJ shedding ¥25 trillion ($172 billion) in government bonds since February 2024. Yields soared: the 40-year JGB leapt 100 basis points since April, touching 3.56%. For once, Japanese savers had alternatives to keeping their money abroad—or in foreign currencies like the franc.

But here’s the paradox: even as yields rose, real returns stayed negative. Inflation ran hot at 3.6% overall (core: 3.2%), outpacing bond coupons and eroding yen value. The market saw through the policy shift: Japan’s government debt, political uncertainty, and trade deficit (¥639B in May) cast a long shadow over the currency.

The Swiss Fortress Holds Firm

Across the Alps, Switzerland’s economic ramparts stood unbreached. Q2 GDP growth surprised at 0.1%, besting forecasts. Even a punishing 39% U.S. tariff on Swiss goods couldn’t dent the franc’s appeal. Pharmaceuticals, finance, and luxury exports kept the engine running. The Swiss National Bank, ever vigilant, signaled that negative rates might return in late 2025 if growth stumbles—but for now, the franc remained a bulwark against global volatility.

Crucially, the franc stayed resilient as a global safe haven—even as volatility (VIX) spiked above 50 in April and global investors scrambled for stability. The euro-franc pair traded flat at 0.9409, and the CHF drew buyers fleeing uncertainty in both Europe and Asia.

Carry Trades Unravel, Macro Winds Shift

For years, the yen was the currency of choice for the global carry trade: borrow at zero, invest in anything with a pulse. But as Japanese yields climbed and the BOJ stepped back, the math changed. With long-term JGBs now yielding over 3%, the yen’s funding advantage faded. Large Japanese investors began repatriating capital, draining support for the franc and other foreign currencies.

Meanwhile, the safe-haven factor—the mysterious blend of gold, CHF, JPY, and US Treasuries—behaved differently in 2025. When April’s U.S.-Japan tariff shock erupted, the yen failed to rally. Instead, it slumped alongside the dollar, while the franc and euro rose. For only the second time in a decade, the dollar’s co-movement with the safe-haven factor turned negative. The world’s risk barometer had shifted: it was the Swiss franc, not the yen, that wore the crown.

Politics, Trade, and the Ghosts of Inflation

Japan’s political backdrop only heightened the drama. Prime Minister Ishiba’s government lost its upper-house majority in July, stoking doubts about fiscal reform. The “largest trade deal in history” with the U.S. brought a $550 billion Japanese investment fund and new tariffs, but also exposed Japan’s vulnerability to global trade winds. Exports to the U.S. and China—together nearly ¥3 trillion—shrank in May, while the deficit widened. The BOJ’s historic “Review of Monetary Policy” read like an admission: after 25 years, the old playbook had failed to deliver durable price stability or yen strength.

The Unraveling: A Tale in Numbers

Between May and August, every classic support for the yen dissolved:

• -16.7%: Three-month JPYCHF drop, with no rebound in sight.
• ¥8.13 trillion: Exports in May—down 11.2% YoY.
• 3.6%: Inflation—outpacing both JGB yields and wage growth.
• 0.1%: Swiss GDP growth in Q2, beating the eurozone and forecasts.
• 39%: U.S. tariff on Swiss goods—yet the franc stands strong.

In every macro storm, investors picked the Swiss fortress over the Japanese experiment. As the yen lost its aura, the franc took up the mantle of global safety.

Will the Yen Ever Find Its Footing?

Currency moves rarely tell a simple story—and this one is a tapestry woven from central bank policy, inflation psychology, carry trade mathematics, and the ceaseless churn of global risk. For now, the yen’s spell is broken. The world has learned: when uncertainty bites, there’s only one Swiss wall to lean on.