Yen Bears Smash Records as Carry Trade Tempts $11B Wager Against Tokyo 🐻

Leveraged funds and asset managers have built up $11 billion in combined short positions against the Japanese yen, the highest level since July 2024, according to data cited by The Kobeissi Letter. The bearish positioning has expanded for three consecutive weeks, with roughly $5 billion added over that period, pointing to expectations of further yen weakness even as Japanese authorities stepped up intervention. The trade underscores how the U.S.-Japan rate gap continues to draw capital into the world's most-watched carry strategy.

The pressure on the currency pushed Tokyo to act. The yen slipped past 160 per dollar in late April, the same threshold that triggered record dollar-selling intervention in 2024. Between late April and late May, Japanese authorities deployed 11.73 trillion yen, approximately $73.6 billion, the largest monthly outlay on record and above the 9.79 trillion yen spent in 2024. The intervention produced a brief relief rally: the yen swung from 160.725 on April 30, a near two-year low, to 155.50, and edged toward 155 by May 6 before resuming its decline. By early June, the currency was again approaching 160, with the Middle East conflict adding further weight.

The Kobeissi Letter attributed the structural pressure to the interest rate differential between Japan and the United States, noting that the Bank of Japan holds its policy rate at 0.75% while U.S. rates sit far higher. The gap rewards traders who borrow yen cheaply to buy higher-yielding assets, a strategy that has weighed on the currency for years. Unwinding of those positions has historically triggered risk reduction across markets, a dynamic that can pressure assets such as Bitcoin ($BTC).

Finance Minister Satsuki Katayama reiterated that authorities stand ready to respond. "As for foreign exchange, we continue to maintain our stance that we stand ready to take appropriate action at any time, as needed," Katayama said. The Bank of Japan is scheduled to meet on June 16, with analysts watching for a possible rate hike to 1% that would narrow the gap and test the conviction behind the record short position.