Call it a conundrum.
Despite North Korea launching a ballistic missile that passed over Japan, in what Japan's Prime Minister Shinzo Abe called an "unprecedented, serious and significant threat," traders still see the yen as a safe-haven play, and they're pushing the currency higher.
The yen has surged, with the dollar fetching as little as 108.32 yen in early Tuesday trade, down from levels approaching 111 yen earlier in the month.
That's in stark contrast to another country likely on the North's target list, South Korea, which saw its currency, the won, markedly drop. The dollar traded as high as 1,127.50 won in early Tuesday Asia trade, compared with around 1,118 won before the launch.
The currency gyrations come as fears rise over the possibility of an armed confrontation with North Korea. Earlier this month, markets were roiled by a statement carried by Pyongyang's state news agency that it was "carefully examining an operational plan" for targeting the U.S. island territory of Guam with "enveloping fire."
If Washington wished to avoid military action, it should stop "recklessly" provoking Pyongyang, a separate statement from another military spokesperson said, according to the state-run outlet.
North Korea's threats comes amid blunt warnings from President Donald Trump, who has used language similar to the North's own frequent saber-rattling: Pyongyang "will be met with fire, fury, and frankly, power, the likes of which this world has never seen before," Trump said earlier this month.
The president's warning followed a Washington Post report, citing a confidential U.S. intelligence assessment, that claimed the pariah state had successfully produced a miniaturized nuclear warhead which could fit inside its missiles.
There had been concerns that if the war of words didn't remain confined between Pyongyang and Trump, the situation could escalate, making Japan a target.
That's a fear that appeared to be confirmed by the early morning launch of the missile over the northern end of Japan.
But instead of outflows, the yen has seen safe-haven inflows.
Takuji Okubo, chief economist at Japan Macro Advisors, said that's because Japan is a net overseas investor, both on the retail and institutional levels.