JPMorgan flags a $103 bn yen short position, unwind could push USD/JPY to 142

JPMorgan Chase strategists have warned that a massive overhang of bearish Japanese yen positions could trigger a sharp, self-reinforcing short squeeze in USD/JPY. The bank estimates that between 16 trillion and 17 trillion yen, equivalent to approximately $103 billion, in short yen positions remains outstanding in the market. A decisive break below the 155 per dollar support level could force a cascading unwind of these positions, theoretically pushing the exchange rate down into the 142 to 146 range. The warning follows a volatile week for USD/JPY, which surged to 160.39 before reversing sharply toward 155.30. The rapid rebound in the yen has been supported by speculation regarding potential asset reallocation by Japan's Government Pension Investment Fund (GPIF) and expectations of accelerated Bank of Japan interest rate hikes. Despite highlighting the substantial positioning risk, JPMorgan strategists led by Junya Tanase caution that market expectations for aggressive BOJ rate hikes and GPIF rebalancing appear excessive. Consequently, the bank views a sustained drop below its projected 155 to 165 range as having a low near-term probability.