The yen carry unwind that convulsed global markets in mid-2024 — when Bank of Japan tightening and Fed pivot signals combined to force a rapid unwind of short-yen leveraged positions — has now been fully absorbed. Positioning data shows the leveraged shorts have been cleared. More importantly, Japanese real-money accounts — the life offices and pension funds — are again the marginal buyer of overseas duration, and their flows are supporting global long-end pricing.
Key takeaways
- Leveraged yen shorts have been cleared.
- Japanese real-money is back as marginal buyer of overseas duration.
- The positioning overhang has cleared.
- Global long-end pricing is now supported.
Why the flows returned
The yield gap between JGBs and overseas duration is still wide enough to justify overseas allocation for yield-hungry Japanese balance sheets. The mid-2024 shock did not change that arithmetic.
- Life office overseas holdings: rebuilt
- GPIF allocation: stable overseas overweight
- Leveraged shorts: cleared
- USDJPY volatility: normalized
What this does to global duration
It supports it. Japanese real-money is a large marginal buyer of US Treasuries and euro-area duration.
What the currency picture shows
USDJPY volatility has compressed to more normal levels. The carry-driven regime is back but on a healthier basis.
What could break the trade
An aggressive BoJ tightening that changes the yield differential.
Yen carry unwind — status
| Metric | Direction |
|---|---|
| Leveraged shorts | Cleared |
| Real-money overseas flows | Positive |
| USDJPY vol | Normalized |
| Global duration bid | Supported |
Japanese real-money is back as marginal buyer of overseas duration.
Frequently asked questions
Is the BoJ still tightening?
Slowly.
Are life offices adding duration?
Yes.
Is the carry trade sustainable?
On real-money basis, yes.
The bottom line
The yen carry unwind is absorbed. Japanese real-money is back — and global duration has a bid.
