Yen under pressure: when bets on currency strengthening become an expensive mistake

Investors have just received an expensive lesson on the carry trade. The yen, which some were betting on to strengthen, has fallen to a 9-month low, and speculators are massively closing their positions.

What happened:

• Dollar/Yen reached 155+ — the highest mark in 9 months
• Long positions on the yen have decreased by more than half from the April high.
• The difference between the interest rates of the USA and Japan still exceeds 300 basis points.

Why the yen rate collapsed:

1. The US economy is resilient — trade shocks have not spoiled growth, the US is in no hurry to lower rates (Trump 2.0 did have an effect)
2. Japan Keeps Its Distance — the new Prime Minister Satsuki Takemi is pressuring the central bank not to raise rates too quickly, fearing it could disrupt the economy.

Result: against the backdrop of soft markets and low volatility, investors are massively exiting from the gheb and switching to carry trades, meaning they are selling yen.

Bank of America forecasts the dollar/yen at the end of the year to be 155, with a risk of rising to 160 in Q4 2025.

Moral: when historical inequalities in rates are economically logical, it is the biggest signal for a turnaround. Investors bet on one thing, but geopolitics with economic policy wrote a different scenario.