What typically happens to the value of the Japanese Yen when US interest rates increase?

When US interest rates increase, the most notable effect is that the demand for dollars increases. Higher interest rates in the US tend to attract foreign capital since investors seek better returns on their investments. As a result, more people want to hold US dollars to take advantage of these higher interest rates. This increased demand for dollars typically leads to a depreciation of the Japanese Yen against the dollar.

While some may consider the Yen to strengthen or remain stable, these scenarios are less likely under the pressures of increased US interest rates. Investors looking for higher returns might prefer to convert their holdings to dollars rather than Yen, reinforcing the demand for dollars and moving capital away from Yen-denominated assets. Thus, the primary outcome of increased US interest rates is indeed a rise in demand for the US dollar, reflecting the dynamics of international capital flows.