Japan BoP: Sell-Japan risk vs. Yen short-squeeze risk

Research evidence excerpt

Japan BoP: Sell-Japan risk vs. Yen short-squeeze risk

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Japan BoP: Sell-Japan risk vs. Yen short-

squeeze risk

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08 July 2026

Exhibit 1: Average cumulative changes in USD/JPY, EUR/JPY, and AUD/JPY by trading session (%)

G10 FX Strategy and the Nikkei 225/MSCI World Index ratio

Global JPY selling has primarily occurred in offshore markets alongside the outperformance of Japanese equities.

20 70 Shusuke Yamada, CFA G10/JPY cumulative % change in Tokyo trading hour FX/Rates Strategist

15 London + NY BofAS Japan +81 3 6225 8515

NKY / ACWI ratio (RHS) 60 shusuke.yamada@bofa.com

weaker yen

5 stronger JP equity

(5) 40

Jan-24 May-24 Sep-24 Jan-25 May-25 Sep-25 Jan-26 May-26

Source: BofA Global Research、Bloomberg

BofA GLOBAL RESEARCH

Japan sell-off risk vs. JPY short unwinding risk

On July 8, Japan’s Ministry of Finance released the Balance of Payments statistics for

May and the International Transactions in Securities statistics (designated major

investors basis) for June. Two key themes emerge. 1) speculative short JPY positioning

has become increasingly stretched, while June saw selling of both Japanese bonds and

equities by foreign investors. 2) Stronger exports are increasingly offsetting the digital

deficit, leaving the improvement in Japan's underlying fundamentals intact.

JPY outlook

The yen faces risks in both directions this summer. Fiscal concerns and perceptions that

the BoJ has fallen behind the curve have attracted growing market attention,

contributing to speculative JPY selling. CME short JPY positions are approaching levels

last seen in July 2024, while the one-year USD/JPY risk reversal has moved into positive

territory for the first time since 2022 (Exhibit 2). In addition, JPY carry trades may be