"Presumably largely related to the carry trade. In the last few years many institutional investors borrowed yen at very cheap interest rates, used it to invest in other countries where the returns were higher. Now with the financial crisis, the stock market is down, returns are less due to lowering of base rates, investments looking more risky, the need for cash is high to cover write downs. Therefore a lot of these loans are being repayed... to repay they need to buy yen, so due to high demand the yen has appreciated. It looks even more severe when compared to some countries eg UK pound where the currency has significantly depreciated even vs the dollar."
When this is connected to what I previously stated about why Japan has had its interest rates kept low it makes sense.
