The won has strengthened against the Japanese yen as the yen remains weak, breaking from the previous pattern in which both currencies moved in the same direction against the dollar. The won-yen exchange rate reached 859.3 Korean won per 100 Japanese yen on the 31st, its lowest level in about two years and one month since 857.5 won on July 11, 2024. The won also closed at 1,368.6 per dollar, down 3.9 won and its lowest level in about one year and one month since 1,367.2 on July 24, 2025. Reduced foreign selling of South Korean stocks, strong semiconductor exports that have supported the current-account surplus, and the Bank of Korea's rate increases have bolstered the won. The central bank raised its base rate by 0.25 percentage points for two consecutive months to an annual 3% on the 27th of last month. Japan's expansionary fiscal policy under the Takaiichi government and the U.S.-Japan interest-rate gap continue to weigh on the yen despite coordinated interventions at the end of July. Hana Bank senior researcher Seo Jeong-hoon expects the won-yen rate to fall further, while Woori Bank economist Min Kyung-won warned that an earlier-than-expected Bank of Japan rate increase in September could trigger yen buying by hedge funds. Yen deposits at the five major South Korean banks reached a record 1.3456 trillion yen as of the 25th of last month, reflecting purchases by investors anticipating a rebound, although a reversal in the yen carry trade could increase global market volatility.