Yen Intervention 'Turbo-charged' the Carry Trade

Japan's historic joint U.S.-Japan currency intervention to prop up the yen may have backfired, giving investors a better opportunity to double down on the carry trade, according to a CNBC report published Aug. 20, 2026. Japanese investors net bought more than 5 trillion yen of foreign equities and long-term bonds over the two weeks ended Aug. 15, compared with net selling of over 300 billion yen in the prior two weeks, according to Japanese Ministry of Finance data cited by CNBC.

Market watchers said the purchases suggest investors took advantage of the yen's sharp rally following last month's joint U.S.-Japan intervention to snap up overseas assets at more favorable exchange rates. The yen strengthened from around 164 per dollar before the intervention to roughly 155, but quickly surrendered a large chunk of those gains and has since weakened back toward 159 against the greenback.

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Intervention 'Turbo-charged' the Carry trade

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Long-term Investors Keep Selling Yen

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Traders See Intervention Rallies as Entry Points

Intervention 'Turbo-charged' the Carry trade

Jesper Koll, expert director at Monex Group, said the intervention has “turbo charged” the carry trade for fundamental and long-term investors. “As long as the cost of money in Japan is lower than the return overseas, carry trades will re-assert,” Koll said.

While authorities succeeded in jolting the yen higher, they did little to change the incentive for investors to borrow or raise funds cheaply in Japan and put the money into higher-yielding assets abroad. The U.S.-Japan 10-year yield spread stood at roughly 1.8 percentage points as of Thursday, Aug. 20, keeping pressure on the Bank of Japan to narrow yield differentials with the U.S.

Long-term Investors Keep Selling Yen

Masahiko Loo, fixed income strategist at State Street Investment Management, said long-term investors such as pension funds and asset managers continued selling yen, and that the incentives to fund in yen remain attractive while U.S.-Japan rate differentials stay wide.

Francis Tan, Asia chief strategist at Indosuez Wealth Management, said the intervention only addressed a “symptom” and did not cure the “disease” of Japan's low borrowing costs and wide interest-rate differentials with other major economies.

Traders See Intervention Rallies as Entry Points

Ashwin Binwani, founder of Alpha Binwani Capital, said he exited long dollar-yen positions after the U.S.-backed intervention before re-establishing them just above 157, expecting the yen to weaken. He said each intervention-driven rally could offer a better entry point to sell the currency.

CFTC data cited by CNBC showed leveraged funds slashed net short yen positions from almost 138,000 contracts at the end of June to 59,526 as of Aug. 11, as authorities demonstrated their willingness to intervene. The data highlight how intervention-driven yen strength has drawn fresh bets against the currency, underscoring the challenge facing policymakers seeking to defend the yen.