So far, fundamentals have been supportive of a weaker Japanese yen, in line with softer oil prices, where benchmark crude oil, Brent and WTI have fallen to below $75 per barrel, keeping a lid on the Japanese inflation trend, in turn, reducing the hawkish rhetoric from the Bank of Japan (BoJ).
All these factors allow the monetary policy sensitive 2-year yield spread between the US Treasury Notes and the Japanese Government Bonds (JGBs) to widen further, as the yield premium is now inching higher to 2.79% at this time of writing, making short-term US fixed income more attractive than Japanese ones, in turn, putting upside pressure on the USD/JPY (see Fig. 1).
Hence, a red-hot US non-farm payrolls data for June (above consensus of 110k, and 172K in May) later is likely to increase a more hawkish pricing of the US Federal Reserve’s future monetary policy, pushing up the 2-year US Treasury and JGB yield spread higher above 2.79%, in turn, triggering more speculators to take on short positions on the Japanese yen.
A swift weakening of the Japanese yen may create some “undesirable fundamental” impact on the Japanese economy, such as softening domestic spending and consumer confidence, offsetting the marginal benefits gained from Japanese automobile exporters.
Also, large speculator net short Japanese yen positions in the FX futures market have reached a 2-year high, making a “deliberate intervention” more effective as the exit door is narrowing due to overcrowded short positions on the yen.
According to the latest data from the Commitment of Traders report as of 23 June 2026, the net short portion of JPY futures (large speculators less large commercials) has remained steady at -288,485 contracts, more than the 02 June 2026 print of -257,335 (see Fig 2.)
Hence, the Japanese authorities may use the Reuters news report to reduce speculative positions but not alter the major uptrend phase of USD/JPY (i.e., the Japanese yen’s major downtrend).