[FX] Unusual moves in the US dollar/yen exchange rate: from yen carry trades to Swiss franc carry trades?

In 2026, the US dollar/yen exchange rate temporarily moved in favor of a stronger yen and weaker US dollar, reaching the ¥152 range. The yen had previously weakened and the US dollar strengthened to above ¥160, but a localized reversal has been observed. One factor cited as contributing to this shift is the unwinding of yen carry trades, with trading strategies that borrow low-yielding yen and invest in higher-yielding currencies believed to be contracting.

Expectations of a Bank of Japan rate hike have risen, and markets are increasingly pricing in a hike at the Bank of Japan's September meeting. Remarks by Takata Hajime (高田創), a Bank of Japan Policy Board member, have also suggested a policy of flexible rate hikes, increasing the possibility that a hike will be priced in at the September meeting. In addition, reports have pointed to remarks by Treasury Secretary Bessent as potentially affecting interest rates and fiscal management in the United States and Japan.

Speculation over changes to the Government Pension Investment Fund (GPIF)'s asset allocation has also attracted attention as a factor supporting yen strength. Although no meeting was held in August, reports following the summer holidays have discussed the possibility of raising the allocation to Japanese government bonds, and some analysts have pointed to a potential impact on supply and demand for the yen.

Some analysts have pointed to a shift from yen carry trades to Swiss franc carry trades. Switzerland's policy rate is 0%, and reports have also raised the possibility of the introduction of negative interest rates. The franc remains a focus as a funding currency in a low-interest-rate environment, while CFTC currency futures positioning shows an expansion in net short positions in the Swiss franc. Going forward, policy decisions by the FOMC, the Bank of Japan and the SNB could influence the market's direction.