BlockBeats news: On September 9, Bloomberg, aggregating data from the Japan Securities Dealers Association and the Tokyo Financial Exchange, found that as of last week, Japanese retail investors held a net yen short position of approximately ¥3.61 trillion (about $23.5 billion), further increasing from August. In July, this position reached ¥4.41 trillion, the highest level since 2015.
Japanese retail investors have long followed a contrarian trading habit of selling when the yen strengthens and buying when it weakens. However, as the yen continues to appreciate, these short positions are facing increasing pressure to close out. Mizuho Bank strategist Masayuki Nakajima noted that if the yen strengthens further, some retail investors may be forced to close their long dollar positions—selling dollars and buying yen—thereby further amplifying the yen’s upward movement.
Bets on a stronger yen have also significantly increased. Data from CME shows that the most actively traded USD/JPY options on Tuesday were put options expiring in November with a strike price of 142.86; the volume of USD/JPY put options expiring by year-end exceeded that of call options by more than threefold. The market is currently primarily betting that USD/JPY will decline toward 150–152, with some 12-month options even pricing in a drop to 140.
Meanwhile, Wall Street remains divided on the yen’s future direction. Some strategists believe the Bank of Japan has limited room for further rate hikes and that the USD/JPY may face policy resistance near 150; others argue that if the Bank of Japan signals further policy tightening, combined with potential accelerated repatriation of overseas funds by Japanese exporters, the yen could still appreciate further.
The current market focus is shifting toward the policy paths of the Federal Reserve and the Bank of Japan. If the yen continues to rise, the large dollar-long and yen-short positions held by Japanese retail investors could transform from a force suppressing the yen into fuel for further yen appreciation through unwinding.