Traders are aggressively betting against the Japanese yen, with net short positions in yen futures reaching approximately -145,800 contracts as of June 9. This marks a nine-year high in bearish speculation, according to CFTC data.
The yen has traded between 157 and 160 per US dollar through May and June. Market consensus indicates a 94% to 96% probability that the Bank of Japan will raise its key policy rate by 25 basis points to 1.0% during its June 15-16 meeting. This would mark the highest level since 1995.
The surge in short positions reflects confidence in the carry trade strategy: borrowing yen at low rates to invest in higher-yielding assets like US Treasuries or crypto. Despite Japan’s inflation forecast rising to 2.8% for 2026 and producer prices climbing 6.1% year-over-year in May, traders believe the upcoming hike is already priced in.
Japanese authorities attempted to support the currency in early May, spending an estimated $34.3 billion on intervention. The effort yielded only a temporary bounce, failing to deter speculators who view current rates as still significantly lower than those in the US.
This dynamic poses risks for global risk assets, particularly crypto. A sudden strengthening of the yen could trigger a carry trade unwind similar to August 2024, forcing traders to buy yen to repay loans and draining liquidity from markets. While a modest hike is expected, any signal from BOJ Governor Kazuo Ueda suggesting faster tightening could spark a volatile squeeze.