The speculative yen short that had built to a 19-year high fell for the first time in the week to 7 July. On the Commodity Futures Trading Commission’s positioning data, the leveraged-fund net short in the yen, futures and options combined, went from −137,828 contracts on 30 June to −104,231, a cover of 33,597 in a week. The last time the book ran heavier was the first half of 2007. Yet the yen barely moved. ...
As interest rates rise, firms buckle. Put July’s run of regional-bank losses beside the collapse of Zentoshin, an Osaka payment agent, and the story writes itself. It is half wrong. The Bank of Japan did raise its policy rate to 1.00% in June, the highest since 1995, but stripped of inflation the real rate is still deeply negative (Dai-ichi Life Research Institute). A rate of 1% is not, in itself, crushing borrowers. What changed is not the level of rates but the machinery that ran beneath them. ...
In 2025 Japan ran a current-account surplus of ¥31.9trn, a record and the second in a row. Yet the yen has not stopped falling. Even after the Bank of Japan raised rates in June 2026, the currency trades around ¥161 to the dollar, close to its weakest since 1986. A record creditor’s currency sits at a four-decade low. Unless that contradiction can be resolved, the question every market participant is asking has no answer: where does the yen go next? ...
Speculative yen shorts have piled up to a record. And yet the options market is pricing the summer as if almost nothing will happen. The two do not belong in the same world. The latest CFTC data, for positions as of 2 June and released on 5 June, put the net yen short held by leveraged funds (futures and options combined) at 105,136 contracts, a further 18,887 deeper on the week. Each contract is ¥12.5m, so the notional yen sold runs to roughly ¥1.3tn. Open interest rose by 89,327 contracts to 559,092. Asset managers are short as well, by 62,814 net: the crowd is not one desk. The powder is close to full. ...
Donald Trump extended the Israel-Lebanon ceasefire by three weeks on Thursday, pushing the 26 April expiry to mid-May. For speculators holding a yen short built to pay out on that discrete binary, the event has not dissolved; it has moved, into the same fortnight as Scott Bessent’s scheduled Tokyo stopover on his way to Mr Trump’s summit with Mr Xi in China. The shift matters because the dollar-yen floor at 160 is held not by any change in Japanese interest rates but by a new bilateral arrangement. Satsuki Katayama, Japan’s finance minister, threatens intervention; Mr Bessent, US treasury secretary, endorses her by declining to contradict her in public. This is the intervention-acquiescence model: US tacit consent to Japanese currency defence, in lieu of the January pressure on the Bank of Japan to raise rates. ...
There are two kinds of statement a finance minister makes: the spoken and the withheld. When America’s treasury secretary, Scott Bessent, met his Japanese counterpart, Satsuki Katayama, in Washington on 15 April, the unspoken carried the weight. When the two last met, in January, the Treasury’s readout noted that Mr Bessent “emphasized the need for sound formulation and communication of monetary policy”, diplomatic code for pressing the Bank of Japan to raise rates. That sentence is absent from the April readout. Ms Katayama, for her part, told reporters that the two ministers had not discussed monetary policy. ...
Scott Bessent worked at Soros Fund Management across two stints between 1991 and 2015, doing one thing supremely well: spotting the moment when a central bank had mispriced risk and the speculative position on the other side was too large to unwind gracefully. When that moment came, the correction was violent. The people positioned for it made fortunes. Bessent was one of the best. Now he runs the US Treasury. Japan holds roughly $1.2 trillion of American government debt, the largest foreign position — a mix of official reserves and private institutional holdings. If the yen weakens far enough, the private side of that equation starts to shift: life insurers and pension funds find hedging costs too high to justify holding US bonds, and new purchases dry up. US borrowing costs rise. ...
Go to any Japanese supermarket and pick up a round box of Snow Brand Megmilk’s “6P Cheese.” Open it and you will find six silver-wrapped wedges of processed cheese arranged like pie slices. The product has been sold in Japan since 1954 – a national staple that appears in children’s lunchboxes, office bento and late-night snacks with a beer. Every Japanese person knows it. When 6P Cheese launched in 1954, a box weighed 170g and each wedge was 19mm thick. In 2026, it weighs 102g and the wedges are 11mm. The diameter of the round box has not changed. Only the contents have shrunk: 40% over 70 years. ...
Energy costs are rising. Interest rates are rising. Raw material costs are rising. All three are happening at once, and all three trace back to the same chokepoint: the Strait of Hormuz, effectively closed since 28 February and still not reopened despite the 8 April ceasefire. In a country that imports 94.2% of its crude from the Middle East, there is no path to consumption growth while this persists. This blog has been bullish on Japan: rising wages, the end of deflation, corporate governance reform. That broad view is not being abandoned. But the hope that the “new Japan” narrative extends to domestic consumption is not supported by the data. The structural reasons why Japan’s policy response is inadequate are explored in a companion piece, The Shrinkflation State. This article traces the macro data and its implications for corporate earnings. ...
Japan’s budget passed. The ceasefire is collapsing. Katayama’s intervention window is open for the first time since she took office.