Yen Hits One-Year High Against the Euro as French Debt Fears Spark a Safe-Haven Rush

The yen is having its best week of the year. In early Asian trade on Friday, the Japanese currency climbed to its highest level in twelve months against the euro — the euro fell to ¥175.20, its lowest against the yen since October last year, before recovering slightly to near ¥175.96. Against the dollar, the yen reached a five-week high at ¥156.08, with trading desks reporting the pair around ¥156.25 in the early session. The trigger was not Tokyo at all: it was Paris.

French fiscal stress is doing the heavy lifting. Investors are uneasy about France’s gaping budget deficit and the risk that rising energy prices squeeze consumption and growth; that has pushed French bonds lower and sent money into classic safe havens — US Treasuries, the Swiss franc and the yen. The flight helped drag the 10-year US Treasury yield below 5% on Thursday for the first time in a month. It has also lifted the Swiss franc enough that traders are watching for action from the Swiss central bank to cap it — which, as Mizuho Bank economist Kyugo Hasegawa noted, could in turn divert more haven-seeking money toward the yen.

The yen has home-grown support this time as well. Japanese government bond yields have risen in recent months and domestic equities have performed, raising the appeal of Japanese assets while inflation stays modest next to the US and Europe. Friday’s data helped: Japan’s consumer prices excluding fresh food rose 2.1% year on year in September, up from 1.7% in August and in line with expectations, while the measure stripping out fresh food and energy — the one the Bank of Japan watches most closely — climbed to 2.4%, up from 2.0%. September was the first month in nine in which inflation has exceeded the BoJ’s target, strengthening the case for a near-term rate rise.

Why this matters: for most of this year the yen was the lowest-yielding major currency — the BoJ sits at 1.25% against the Fed’s 3.75–4.00% and the ECB’s 2.50% — which made it the natural funding currency for carry trades. Friday’s move shows how quickly that positioning can unwind when risk appetite wobbles: the yen can strengthen even while the dollar itself stays firm, and the euro is especially exposed because the ECB meets on October 29 with its currency already weighed down by French politics. It is also a reminder that the yen’s haven bid and its monetary-policy bid can stack: Standard Chartered expects the BoJ to hold at 1.25% at its October 29–30 meeting but with a clearly hawkish tone, with December now a live meeting and January 2027 its base case for the next hike.

What to watch next: next week’s central-bank cluster — the Fed decides on October 28, where the market still leans toward a hold, and the BoJ follows on the 29th–30th. If the BoJ’s outlook report keeps inflation on track for further tightening while French bond stress persists, the yen’s dual tailwind holds; if the Fed surprises hawkishly, rate-gap gravity pulls the dollar-yen pair back toward 160. Either way, this is a level where carry traders feel maximum pain — and where position sizing matters more than conviction. Our free forex course covers risk planning that works in any market, and the forex tools page has calculators to map out positions before volatility arrives. (Not financial advice.)