Although the yen has shown overall weakness this year, it is still likely to become a preferred safe-haven asset for investors in the face of the upcoming USA elections.

Historical data shows that the yen has outperformed traditional safe-haven assets such as the US dollar, gold, and the Swiss franc in past USA elections.

Trump's lead in the polls has intensified market uncertainty. Investor anxiety is rising, prompting them to seek safe investment choices. Data compiled by Bloomberg shows that on the eve of the November 5 election, the yen once again became the best performing currency in the market during times of extreme pressure.

"The yen remains a safe haven," said Naomi Fink, Chief Global Strategist at Nomura Asset Management.

"If market risks decrease, we expect the yen to appreciate, and carry trades with the yen as the funding currency will be unwound."

Is the Japanese yen becoming a "safe haven" amid increasing uncertainty?

The Liberal Democratic Party of Japan suffered a crushing defeat in the election held on the 27th, leading to pressure on the Japanese yen. Shigeru Ishiba stated that he will not resign, indicating that the LDP needs to find new coalition partners.

Some analysts believe that before the new government is formed, there may be weeks of debate in Japanese politics. Coupled with the significant interest rate differences between Japan and other major economies, the yen is facing tremendous selling pressure.

Nevertheless, some investors believe that the yen has key advantages. Japan's $20 billion current account surplus, ample yen liquidity, and relatively low inflation rate position the yen as the world's third-largest trading currency with unique advantages as a safe-haven asset.

Furthermore, investors' concerns about other traditional safe havens have also enhanced the attractiveness of the yen. The prospect of expanding the US fiscal deficit has weakened confidence in the dollar and US bonds. Both Trump and Harris did not declare plans to reduce the deficit in their campaigns, bringing greater risk to bond investments.

With forty years of market experience, Stephen Miller, advisor at GSFM, a subsidiary of Canadian CI Financial Corp., stated:

"If the US bond market struggles due to fiscal deficit risks, then US Treasury bonds may not be the safest asset, nor the US dollar."

Lower tariff risks also favor the yen. According to BNP Paribas Wealth Management, potential trade conflicts with the US could drive the euro to parity against the dollar. The Swiss franc lacks liquidity compared to the yen, while gold trading prices are close to historical highs, limiting significant rises in gold if the market collapses.

Morgan Stanley: The dominance of the US dollar is difficult to be challenged.

Of course, there are also analysts who hold different views on the Japanese yen as a safe-haven asset.

Morgan Stanley believes that US Treasury bonds are more capable of resisting sell-offs caused by political risks. Considering that the US dollar accounts for 88% of the trading volume in the $7.5 trillion daily forex market, the dominance of the US dollar is difficult to be challenged.

Peter Boockvar, Chief Investment Officer of Bleakly Financial Group in New Jersey, stated:

"The Japanese yen once held a classic safe-haven status, but I am not sure if it can still maintain this position. Currently, the yen seems to be more related to interest rate differentials."

Editor/Rocky