Why did the Japanese Yen fall so dramatically against the dollar in 2022 and why is it recovering now?
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I should clarify, USD
The yen didn’t fall. The dollar rose. The curves for $1 to [yen](https://www.xe.com/currencyconverter/convert/?Amount=1&From=USD&To=JPY), [Euros](https://www.xe.com/currencyconverter/convert/?Amount=1&From=USD&To=EUR), [pounds](https://www.xe.com/currencyconverter/convert/?Amount=1&From=USD&To=GBP), [rupees](https://www.xe.com/currencyconverter/convert/?Amount=1&From=USD&To=INR), and [yuan](https://www.xe.com/currencyconverter/convert/?Amount=1&From=USD&To=CNY) all have basically the same shape, suggesting that those currencies stayed stable while the dollar rose last year (and has fallen some in the last few months).
Most western countries saw inflation last year due to the lifting of covid measures opening up markets conflated with the constricted energy market due to sanctions on Russian energy. The US dollar saw less inflation than the Japanese yen, so comparatively, the dollar gained value over the yen in that time. It’s similar with a number of other currencies as well.
Pretty much every other major currency value fell relative to the USD last year. This is because the Federal Reserve started to increase interest rates in the US. This has the effect of “pulling in” assets from countries with unchanged or lower interest rates as they seek greater returns. This increased demand for USD causes the USD to appreciate relative to other currencies.
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