Hedge funds have increased bearish bets on the Japanese yen to their highest level since 2007 as the currency hovers near a four-decade low against the US dollar.

Data from the Commodity Futures Trading Commission showed leveraged funds raised net short positions to almost 138,000 futures and options contracts as of 30 June, reflecting growing expectations that the yen will weaken further.

The currency recently fell beyond ¥162 to the dollar, its weakest level since 1986, fuelling speculation that Japanese authorities could intervene in the foreign exchange market. The yen has been pressured this year by the wide interest rate differential between Japan and the US, despite the Bank of Japan's recent rate hike.

Market sentiment has also been weighed down by Prime Minister Sanae Takaichi's fiscal spending plans and her support for accommodative monetary policy. Meanwhile, Finance Minister Satsuki Katayama has reiterated that the government stands ready to take action in currency markets if required.

Japan previously spent a record ¥11.73tn ($72.7bn) intervening to support the yen between late April and late May.