Hedge Funds Boost Yen Shorts by Most Since 2015 on Japan Vote

Hedge funds ramped up bearish yen wagers by the most in over a decade last week as investors weighed the prospects of a snap Japanese election and its implication on fiscal policy.

Leveraged funds increased net yen shorts by 35,624 contracts during the week ended Jan. 13, the most since May 2015, data from the Commodity Futures Trading Commission showed. It was the first increase in bearish bets in five weeks.

Japan’s currency dropped to the weakest since July 2024 last week as traders wagered that Prime Minister Sanae Takaichi may triumph in an election and embark on further stimulus, leading to a wider fiscal deficit. The yen’s losses have spurred speculation that policymakers may step in to arrest the decline, especially after the currency neared 160 per dollar, the level around which authorities last intervened.

“The data are sufficient for the authorities to demonstrate that the recent rise in dollar-yen has been driven by speculation,” said Hiroyuki Machida , director of Japan foreign-exchange and commodities sales at Australia & New Zealand Banking Group Ltd. in Tokyo. “It means conditions are increasingly in place to strongly justify intervention.”