Institutional investors have piled into bets against the Japanese yen, pushing combined short positions to $11 billion — the highest since July 2024. The short exposure has grown for three straight weeks, adding $5 billion over that period, as traders bet that Japan's ultra-low interest rates will keep the yen weak against the dollar.
Three weeks of building pressure
The surge comes despite Japan spending a record 11.73 trillion yen (about $73.6 billion) on yen-support intervention between late April and late May 2024. That topped the 9.79 trillion yen spent in 2024. The yen weakened past 160 per dollar in late April, the same level that triggered dollar-selling intervention in 2024. On April 30, the yen swung from 160.725 to 155.50 after intervention, then drifted toward 155 by May 6 before sliding again.
By early June the yen was back near 160, pressured further by the Middle East conflict. The wide interest rate gap — Japan's policy rate sits at 0.75% while the US rate remains elevated — remains the main structural driver. Finance Minister Satsuki Katayama said authorities remain ready to act on forex as needed, but traders are calling her bluff.
The carry trade and crypto angle
The carry trade — borrowing cheap yen to buy higher-yielding assets — has weighed on the yen for years. If the yen suddenly strengthens, that trade unwinds fast, and crypto isn't immune. An unwind could hit Bitcoin and other risk assets as leveraged positions get squeezed. The timing isn't great: the yen shorts are at a record while the carry trade is deeply entrenched.
BOJ's next move
The Bank of Japan meets on June 16 and may raise its policy rate to 1%, which would narrow the rate gap and test the record short position. A hike would be the first meaningful step toward normalizing policy after years of negative rates. But the BOJ has moved cautiously — even a small hike could trigger sharp yen buying. That's exactly what the shorts are betting won't happen. One way or another, June 16 will answer who's wrong.
