Trillions of "bullets" show their power! Japan's intervention forces hedge funds to retreat temporarily, as the Japanese yen shorts temporarily avoid the sharp edge.

With the Japanese official intervention to support the yen, the bearish positions on the yen have greatly reduced, highlighting that official actions are forcing a popular trade to gradually close out. According to data from the U.S. Commodity Futures Trading Commission (CFTC), leveraged funds have reduced their net short yen positions in the week ending May 5. Currently, these funds hold 61,340 net short contracts, worth approximately $4.9 billion, the lowest level in a month. Asset management companies have also reduced their short positions by 13,839 contracts, dropping to 10,653 contracts. "Intervention risks and strong official warnings have made it less attractive to continue shorting the yen near the 160 level," said Stefan Rittner, Senior Portfolio Manager at Allianz Global Investors, who holds a neutral view on the USD/JPY exchange rate. However, "despite the undervaluation of the yen, the continued presence of structural resistance limits its potential for sustained rebound; if the USD/JPY exchange rate approaches previous highs again, intervention risks may rise again." According to an analysis of the Bank of Japan's accounts, Japanese authorities conducted multiple rounds of intervention during the Golden Week holiday period starting from April 30, with the total scale possibly reaching around 10 trillion yen. Although Japan's top foreign exchange official, Jun Muramatsu, did not directly confirm the intervention action, he stated that the authorities are prepared to address speculative volatility at all levels and added that IMF rules do not limit the frequency of intervention. The yen-to-dollar exchange rate reached a ten-week high of 155.04 last Wednesday, then retraced some of its gains. Analysts point out that although intervention measures have forced some clearing of yen short positions, they have not fundamentally changed the market's underlying narrative. If the yen exchange rate approaches the 160 level again, short positions may rebuild, triggering further official intervention. On Monday, the yen weakened slightly against the dollar, falling by nearly 0.3% to 157.11 yen per dollar.