FX Watch: Japan BoP: Record inflows vs stretched spec yen shorts

Research evidence excerpt

FX Watch: Japan BoP: Record inflows vs stretched spec yen shorts

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FX Watch

Japan BoP: Record inflows vs stretched

spec yen shorts

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08 June 2026

Exhibit 1: Inward portfolio investment to Japan at record highs vs stretched spec yen shorts

G10 FX Strategy Inward portfolio investment (12-month rolling, ¥tn) and speculative JPY short positions (CME non-

Global commercial JPY futures open interest)

Shusuke Yamada, CFA

Net inward security investment Spec JPY positioning (RHS) FX/Rates Strategist

60 200,000 BofAS Japan

+81 3 6225 8515

shusuke.yamada@bofa.com

100,000

0 0

-20

-100,000

-40

-60 -200,000

May-06 May-11 May-16 May-21 May-26

Source: BofA Global Research, Bloomberg

BofA GLOBAL RESEARCH

Inward investment vs spec yen shorts, BoP normalized

On June 8, the Ministry of Finance released the April balance of payments (BoP) and May

portfolio flow data (designated reporting institutions basis). 1) Inward portfolio

investment remains elevated, while speculative JPY shorts are becoming stretched. 2)

Outward investment continues to be strong. 3) The basic BoP has returned to balance,

although energy imports are likely to increase. Developments surrounding the Strait of

Hormuz are likely to be a key factor.

JPY outlook: a hawkish BoJ hike could lift JPY

Structural JPY selling persists, but is being offset by inward investment and export

growth, contributing to a normalization of external balances. At the same time,

speculative JPY shorts are becoming stretched. Hedging strategies among domestic and

overseas investors, as well as corporates, may be predicated on prolonged JPY weakness

following the extended depreciation trend. If the BoJ delivers a hawkish rate hike at next

week’s policy meeting, this could trigger unwinding of yen shorts and prompt a