Hedge funds sharply increased bearish positions on the Japanese yen last week, marking the largest rise in short bets in more than a decade, as investors assessed the likelihood of a snap election and its potential impact on fiscal policy, according to a report by Bloomberg.
Data from the US Commodity Futures Trading Commission showed leveraged funds lifted net short yen positions by 35,624 contracts in the week to 13 January — the biggest weekly increase since May 2015 and the first rise in bearish positioning in five weeks.
The move came as the yen weakened to its lowest level since July 2024, with traders increasingly pricing in the possibility that Prime Minister Sanae Takaichi could call an early election and pursue additional fiscal stimulus. Such a scenario is widely seen as raising the risk of wider budget deficits and prolonged pressure on the currency.
The yen’s decline, which pushed it close to the 160-per-dollar level, has renewed market speculation that Japanese authorities could intervene to stem further losses. That threshold was last associated with official intervention during previous periods of sharp currency weakness.
Market participants noted that the scale of speculative positioning may strengthen the case for action by policymakers. Analysts at Australia & New Zealand Banking Group said the data supports the view that recent dollar-yen moves have been driven largely by speculative flows, increasing the likelihood of official intervention if volatility persists.
