Yen shorts hit nine-year high as carry trade revives

Leveraged funds' net short yen positions exceeded 115,000 contracts in the week through June 9, the largest bearish bet since November 2017, as the carry trade returns despite higher Japanese yields. The positioning buildup coincides with USD/JPY trading near 160, a level that has previously triggered intervention warnings from Japanese authorities. Japan's 10-year yield has climbed to 1.95 percent from 1.1 percent at the start of 2025, yet the yen remains "stubbornly weak" as markets expect only gradual Bank of Japan tightening. With an estimated $500 billion in outstanding yen-funded positions and Tuesday's BoJ meeting approaching, the stage is set for volatility if policymakers surprise with more aggressive action.