USD/JPY briefly rose to ¥152.89 in the Tokyo market, marking the yen’s strongest level in approximately 7 months. Following remarks by Treasury Secretary Scott Bessent, speculation is growing that the unwinding of yen carry trades built up to date has begun.
The yen’s advance has continued in the foreign exchange market, with USD/JPY reaching ¥152.89 at one point in the Tokyo market on 8 September. The pair was reportedly around ¥160 the previous week, meaning the yen has risen approximately 4.5% against the dollar during that period.
Yen buying accelerated after Treasury Secretary Scott Bessent said that the Bank of Japan would "do the right thing" by raising rates, while indications at the G20 suggested that the BOJ and the Japanese government were likely to take steps that would support a stronger yen. Following signals from the BOJ regarding a rate hike, market efforts to contain yen-selling positions through both intervention and monetary policy intensified.
The scale of yen carry trades has been highlighted, with Reuters reporting that international yen-denominated borrowing reached a record high of approximately ¥360 trillion as of the end of March this year. If expectations that the BOJ will continue raising rates become more widespread, some of the funds used to sell yen could flow back into Japan, according to market speculation.
The premise that "yen depreciation will continue forever" is beginning to break down, but many market participants remain cautious about a full and lasting appreciation of the yen, given that U.S. 10-year Treasury yields remain high in the 4% range and the impact of higher oil prices. The Bessent salvo may result in only a temporary unwinding, and market developments will continue to warrant close attention.