The Japanese Yen's Resurgence as a Safe-Haven Asset: Navigating Risk-Off Sentiment in 2025

In 2025, global markets have been defined by heightened risk-off sentiment, driven by escalating trade tensions, U.S. fiscal uncertainty, and geopolitical volatility. Amid this backdrop, the Japanese yen (JPY) has reemerged as a focal point for investors seeking refuge, though its role as a safe-haven asset remains contested. While the yen has appreciated by over 10% year-to-date against the U.S. dollar, its performance has been inconsistent, raising questions about its reliability compared to alternatives like gold and the Swiss franc (CHF). This analysis explores the yen's evolving dynamics, the factors undermining its safe-haven appeal, and the implications for currency portfolios in a fragmented global market.

The Yen's Mixed Performance in 2025

The yen's traditional safe-haven status has faced scrutiny in 2025, as it has exhibited divergent behavior during risk-off and risk-on phases. According to NBC New York, the yen has strengthened during periods of market stress but has also weakened during risk-on rallies, contradicting its historical role as a stable hedge. This inconsistency is attributed to two key factors: Japan's political uncertainty and the Bank of Japan's (BoJ) cautious normalization of monetary policy.

Political instability, including the resignation of Prime Minister Fumio Kishida and the rise of pro-stimulus figures like Sanae Takaichi, has fueled concerns about Japan's fiscal trajectory, a point also highlighted in the NBC piece. Meanwhile, the BoJ's reluctance to accelerate rate hikes-keeping its policy rate at 0.5%-has left the yen vulnerable to carry-trade dynamics, where investors borrow in low-yielding JPY to fund higher-yielding assets, according to EC Markets. Despite these challenges, the yen has benefited from capital inflows into Japanese Government Bonds (JGBs), with speculative long positions reaching 198,560 contracts in recent weeks, as noted by ACY in its market analysis on recent flows and positioningACY analysis.

Gold and the Swiss Franc: Emerging Alternatives

While the yen remains a top safe-haven currency, its dominance has been challenged by gold and the Swiss franc. Gold, in particular, has outperformed traditional havens, surging 30% year-to-date in 2025, as documented in the NBC coverage. Its appeal lies in its apolitical nature, limited supply, and intrinsic value, which make it a preferred asset during periods of fiscal and geopolitical uncertainty. According to EBC, central banks have also bolstered gold's case, adding 1,044.6 tons to global reserves in 2024, with 95% of surveyed institutions planning to increase holdings further.

The Swiss franc, meanwhile, has gained traction as an alternative safe haven, rising over 10% against the U.S. dollar in 2025, a trend noted in ACY's market analysis. Analysts attribute this to Switzerland's strong fiscal position, low inflation, and long-standing reputation for stability, themes explored by EC Markets. However, the Swiss National Bank's (SNB) tolerance for a stronger franc and its potential to reintroduce negative interest rates have limited the currency's appeal compared to gold, as reported by Swissinfo.

Implications for Currency Portfolios

For investors, the yen's mixed performance underscores the need for diversified safe-haven strategies. While the yen remains a viable hedge, its reliability is contingent on BoJ policy. As noted by EC Markets, any signs of rate hikes could restore some of the yen's safe-haven appeal, but as long as the BoJ maintains a dovish stance, the currency will remain susceptible to speculative pressure.

Gold and the Swiss franc offer complementary options. Gold's decoupling from government liabilities makes it a robust hedge during systemic risks, while the Swiss franc provides a liquid, stable alternative for capital preservation - a point echoed in Swissinfo's coverage. Portfolio managers are increasingly adopting a multi-asset approach, allocating to both fiat-based havens (JPY, CHF) and non-fiat assets (gold) to balance liquidity, yield, and risk mitigation, as discussed in the EBC analysis.

Conclusion

The Japanese yen's resurgence in 2025 reflects its enduring role as a safe-haven asset, but its performance highlights the evolving nature of global risk management. Political and monetary uncertainties in Japan, coupled with the rise of gold and the Swiss franc, have created a fragmented landscape for investors. As risk-off sentiment persists, currency portfolios must adapt by diversifying across traditional and non-traditional havens, while closely monitoring BoJ policy and geopolitical developments. In a world of heightened volatility, flexibility and strategic allocation will be key to navigating the uncertainties of 2025 and beyond.