JPMorgan Chase strategists are warning that a further unwind of yen short positions could accelerate the currency's recent gains if dollar-yen breaks below 155, according to a Bloomberg report (gated).

The bank estimates that between ¥16 trillion and ¥17 trillion of bearish yen positioning remains outstanding in the market — the lower figure equivalent to roughly $103 billion — and says a complete unwind of that scale could theoretically push dollar-yen into a 142 to 146 range, a materially stronger yen than current levels imply. Short positions of this kind reflect traders borrowing yen to fund bets on higher-yielding currencies, a carry trade that becomes costly to maintain when the yen strengthens, forcing repurchases that can compound the move.

The warning follows one of the yen's sharpest rallies since Japan and the United States jointly intervened to support the currency in late July. Dollar-yen climbed as high as 160.39 earlier this week, its highest level since that intervention, before reversing sharply to trade as low as 155.30, bringing the pair within a whisker of its post-intervention low of 155.23. Japanese authorities have repeatedly said they are ready to act against excessive currency moves, making official intervention another factor traders are monitoring as the pair approaches levels that previously drew action.

Strategists led by Junya Tanase said recent price action supports their view that a relatively large yen short position may still be sitting in the market, warning that a break below 155 raises the risk that "selling could beget further selling" and drive a larger than expected yen appreciation.

The rally has been fuelled by speculation over a potential shift in the Government Pension Investment Fund's asset allocation strategy, along with growing expectations that the Bank of Japan will accelerate the pace of its rate hikes. The GPIF, the world's largest pension fund with assets of roughly ¥250 trillion, holds a substantial share of its portfolio in foreign currency-denominated assets, so even incremental changes to its hedging or allocation policy are watched closely by currency markets. Market watchers say those two catalysts have been amplified further by an unwind of speculative yen short positions and hedging demand from domestic Japanese investors — a dynamic that raises the risk of further gains forcing even more bearish positions to close out.

Despite flagging that risk, JPMorgan is not endorsing the more aggressive end of the market's expectations. The bank says current expectations around both the GPIF reallocation and the pace of BOJ tightening look "a bit excessive," and does not currently see a high probability of dollar-yen falling materially below its own assumed range of 155 to 165.

That leaves JPMorgan's near-term view genuinely two-sided: positioning risk argues for caution on aggressive short yen bets near 155, while the bank's own base case argues against chasing a much deeper yen rally from here. The bank acknowledges real downside risk to dollar-yen from a positioning unwind, while stopping short of forecasting the deeper, sustained yen strength that a full unwind of the estimated short base would imply. For markets, the key checkpoints ahead are whether dollar-yen holds above the 155 level, any official statements or action from Japan's Ministry of Finance, the timing of the next BOJ policy decision, and whether the GPIF confirms or rejects the reported allocation shift.