Outrageous Predictions
Carry trade unwind brings USD/JPY to 100 and Japan’s next asset bubble
Charu Chanana
Chief Investment Strategist
Chief Investment Strategist
A cautious BOJ keeps USD/JPY supported, the pair breaks above 160.50, and Japanese officials step up verbal warnings. If spot pushes into the 160.70–161.00 zone, the risk of actual yen-buying intervention rises sharply — especially if US yields are softer or markets start leaning toward a more dovish Fed path.
The main risk is that intervention does not come, or only comes as verbal warnings, leaving USD/JPY free to grind higher if the BOJ disappoints and US yields stay firm. A hawkish Fed, stronger US data, or renewed risk-on flows could also keep dollar demand strong and reduce the effectiveness of any yen-buying.
Even if intervention happens, it may only deliver a sharp but temporary squeeze unless rate differentials move in Japan’s favour.
The other risk is timing: authorities may prefer to tolerate some overshoot above 160 before acting, which means traders can still face painful two-way volatility before any official move.
Japan usually prefers moments when liquidity is thinner and the move can have more impact. The key windows are:
Intervention can bring an immediate 2–3% yen rally, which means USD/JPY could fall roughly 3–5 big figures from around 160. That puts 155–157 as the first shock zone. If the macro backdrop also turns dollar-negative, the move could extend toward 152–153.
A dovish BOJ can keep USD/JPY bid, but a softer Fed setup could make this a better intervention window. Above 160, chasing upside becomes less of a trend trade and more of a policy-risk trade.