Japanese retail investors increased their yen short positions against the dollar by 50% since September 1, reaching 2.886 trillion yen, or about $18.6 billion, at the end of August. Their positions account for more than half of the 4.1 trillion yen in global retail bets against the yen, despite the currency’s rebound to a seven-month high of 152.89 per dollar on September 8. Broader speculative accounts turned net long yen last week as traders became more confident that the Bank of Japan would normalize its ultra-loose monetary policy. The retail positioning, known in Japan as Mrs. Watanabe, leaves the yen vulnerable to further gains if traders are forced to unwind short positions, particularly if dollar-yen breaks below 152. Japanese households have historically used carry trades (borrowing low-yielding currencies to buy higher-yielding assets) to earn swap points, or interest-rate differentials, while the yen weakened. The currency fell to a four-decade low of 163.99 per dollar in July before a rare joint intervention by Tokyo and Washington helped trigger its recovery. Markets are now focused on Federal Reserve and Bank of Japan decisions due Wednesday and Friday, respectively. Traders price roughly an 80% chance of a Bank of Japan rate increase on Friday, while two 25-basis-point hikes are expected by the end of January. Bank of America analysts said consecutive increases remain unlikely unless dollar-yen reverses its recent decline and returns to levels seen before the intervention. The yen weakened to around 155.34 per dollar on Wednesday after reaching 155.43 in Asian trading, while energy prices linked to the Middle East conflict have lifted Treasury yields and complicated the inflation outlook. A continued yen advance could amplify gains through retail short covering, while a renewed decline would validate the household traders’ bearish positioning.