Traders are piling into bets against the Japanese yen at a pace not seen in nearly a decade, and the timing is deliberate. Net short positions in yen futures hit approximately -145,800 contracts as of June 9, according to CFTC data, marking a nine-year high in bearish speculation against Japan’s currency.
The yen has been hovering between 157 and 160 per US dollar through May and June, and the market consensus is clear: the Bank of Japan’s upcoming policy meeting on June 15-16 will deliver a 25 basis point rate hike to 1.0%. Probability estimates for that outcome sit between 94% and 96%.
That would bring Japan’s key policy rate to its highest level since 1995.
The carry trade is back, and it brought friends
The mechanics are straightforward. Borrow yen at Japan’s historically rock-bottom interest rates, convert it to dollars or another currency, and park that money in higher-yielding assets. Stocks, bonds, crypto, whatever offers a better return than near-zero Japanese rates. The spread between borrowing costs and investment returns is your profit.
