--- title: "$87 Billion Intervention Backfires, Offering Carry Traders a Prime Shorting Opportunity: Yen Gives Back Half of Gains, Approaching 160 as Takaichi Government Backs Autumn Rate Hike" type: "News" locale: "en" url: "https://longbridge.com/en/news/295916739.md" description: "The record-breaking joint US-Japan foreign exchange intervention yielded only a brief rebound for the yen, instead becoming an opportunity for carry traders to rebuild short yen positions at higher levels. Driven by massive interest rate differentials, capital continues to flow into high-yielding currencies such as the Australian dollar and the US dollar, keeping carry trades hot. The yen is once again approaching the 160 mark and faces the risk of retesting 162" datetime: "2026-08-14T08:36:54.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/295916739.md) - [en](https://longbridge.com/en/news/295916739.md) - [zh-HK](https://longbridge.com/zh-HK/news/295916739.md) --- # $87 Billion Intervention Backfires, Offering Carry Traders a Prime Shorting Opportunity: Yen Gives Back Half of Gains, Approaching 160 as Takaichi Government Backs Autumn Rate Hike The record-breaking joint US-Japan foreign exchange intervention failed to reverse the yen's weakness, instead providing carry traders with an opportunity to rebuild short yen positions at higher levels—amidst the interest rate gap, any effort to support the yen may become a new entry point for short sellers. The joint US-Japan intervention totaling approximately $87 billion in late July resulted in only a fleeting exchange rate rebound. According to market observers such as J.P. Morgan Private Bank and State Street Bank & Trust, **hedge funds had halved their short yen positions by August 4, but some investors have already begun returning to yen-funded carry trades, with the yen giving back half of its post-intervention gains and approaching the 160 level.** In response to the yen's renewed weakness, the Sanae Takaichi government supports the Bank of Japan raising interest rates in September or October. Overnight index swaps indicate that traders have priced in a 25 basis point rate hike by the Bank of Japan before October; however, Japan's 1% policy rate remains lower than those of most developed economies, leaving the interest rate gap unchanged and the appeal of carry trades undiminished. Details of the intervention scale further confirm its limitations: approximately $53 billion on July 30 (which would be the largest single-day intervention in history if confirmed) and about $34 billion on July 31. Carry trade capital showed the greatest interest in the Australian dollar, followed by the euro, USD/JPY, Canadian dollar, and British pound, collectively forming the main counterparties to yen-funded carry trades. ## Intervention Becomes a Shorting Opportunity for Carry Traders Ashwin Binwani, founder of Alpha Binwani Capital, bought USD/JPY at around 157, betting on yen weakness, with the rate now recovering to 159.27. "Intervention is an excellent opportunity to sell the yen at higher levels," said Binwani. "We are not afraid of authorities' actions; the returns from carry trades are too lucrative to miss." **After hedge funds halved their short yen positions by August 4, some capital has begun to flow back.** Damien Loh, Chief Investment Officer at Ericsenz Capital, also re-entered long USD/JPY positions near 157 following the previous round of intervention: in addition to positive carry, this position hedges other short USD exposures in his portfolio. However, investors' rebuilding of short positions itself increases the probability of authorities intervening again. ## Government Backs Autumn Rate Hike, But Interest Rate Gap Remains Unchanged Reportedly, the Sanae Takaichi government supports a near-term rate hike by the Bank of Japan, with the next move possibly occurring in September or October. Overnight index swaps show that traders have priced in a 25 basis point hike by the Bank of Japan before October, but this is insufficient to significantly narrow the interest rate differential with the United States. Japan's 1% policy rate is lower than those of most developed economies, and fiscal concerns are putting further pressure on the yen. In the bond market, the yield on 10-year Japanese government bonds has risen to 2.883%, a new high since 1996, while the 40-year yield has climbed to 4.055%. The term spread between 10-year and 2-year government bonds has widened to 1.4 percentage points. George Efstathopoulos, portfolio manager at Fidelity International, stated: > "As long as the Bank of Japan remains behind the curve, yen-funded carry trades will continue to thrive." ## Australian Dollar and Euro Become Main Counterparties, Forward Market Sounds Alarm Bart Wakabayashi, manager at State Street Bank & Trust's Tokyo branch, stated that the bank's proprietary data shows real money accounts maintaining carry trade positions, selling the yen against a basket of G10 currencies, with the greatest interest in the Australian dollar, followed by the euro, USD/JPY, Canadian dollar, and British pound. During the joint intervention in late July, the US Treasury coordinated by selling euros and buying yen. The rise in 1-year yen forwards is causing concern in Tokyo, a trend typically associated with direct USD buying, as traders utilize the post-intervention rebound to reload carry trade positions. This year, returns from shorting the yen against the Colombian peso, Turkish lira, and Norwegian krone have all exceeded 10%. Yuxuan Tang, Head of Asian Rates and FX Strategy at J.P. Morgan Private Bank, noted, "Unless the US dollar and US Treasury yields decline significantly, carry traders may push USD/JPY to retest 162." She added that the market also recognizes that repeated interventions are becoming increasingly costly for Japan. US Treasury Secretary Bessent reiterated support for stabilizing the yen, stating that yen weakness could trigger broader depreciation across Asia, and Washington would support Japan "at all costs." The Bank of Japan's monetary policy meetings in September or October, along with whether authorities will intervene in the market again, will be key determinants for the direction of carry trades and the yen's exchange rate trajectory. ### Related Stocks - [JPM.US](https://longbridge.com/en/quote/JPM.US.md) - [STT.US](https://longbridge.com/en/quote/STT.US.md) - [JPM-M.US](https://longbridge.com/en/quote/JPM-M.US.md) - [JPM-C.US](https://longbridge.com/en/quote/JPM-C.US.md) - [JPM-D.US](https://longbridge.com/en/quote/JPM-D.US.md) - [JPM-L.US](https://longbridge.com/en/quote/JPM-L.US.md) - [8634.JP](https://longbridge.com/en/quote/8634.JP.md) - [JPM-K.US](https://longbridge.com/en/quote/JPM-K.US.md) - [JPM-J.US](https://longbridge.com/en/quote/JPM-J.US.md) - [SPIN.US](https://longbridge.com/en/quote/SPIN.US.md) ## Related News & Research - [Alphabet's SpaceX bet grows 100-fold over a decade to $94 billion](https://longbridge.com/en/news/295915905.md) - [4-Oil set for weekly gains after US threatens indefinite blockade of Iran](https://longbridge.com/en/news/295923118.md) - [Exodus Movement, Inc. 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