GBP/JPY: Japanese are Becoming Net Sellers

Carry trades use to be one of the most popular trading strategies for retail forex traders, but in the past year, that has changed significantly. The Japanese have always been the biggest buyers of carry trades but having been burned significantly, they are finally starting to cut their losses. According to the latest data from the Tokyo Financial Exchange (TFX), one of Japan’s largest retail FX brokers, traders have become a net seller of GBP/JPY (Related: Japanese Retail FX Positioning).

After hitting a high above 250 in July 2007, GBP/JPY has fallen 48 percent. The positioning data suggests that the Japanese have been sitting with their long carry trade positions for as long as they can and now that interest rate differentials have compressed so significantly, they are finally bailing. At TFX, 69 percent of all GBP/JPY transactions as of Feb 3, 2009 is to sell the currency pair.

Although, many of the other yen crosses have also depreciated significantly over the past year, Japanese investors have been hesitant of shorting carry trades aggressively because they still have to pay interest on any short positions. With GBP/JPY however the interest rate differential rate differential is falling and falling fast. As the cost of shorting carry trades fall, we could see more interest from Japanese retail traders. In the meantime however, for the pairs that still have higher interest rate differentials like AUD/JPY and NZD/JPY, short positions will not be held long.

Source: TFX

Source: TFX

source: TFX

source: TFX



  1. Hi Kathy,

    Not being steeped in trading jargon, in relation to GBP/JPY am I right to interpret that the Japanese are going to start shorting GBP even though it has halved? I have seen a couple of calls for GBP/JPY parity. How low in 2009 do you see it going?

    Thank you

  2. I think it will be headed up (IMHO).

    1) CDS rates for BoJ sovereign debt are rising, and falling for BoE
    2) Chicago futures indicating long positions increasing on GBP, decreasing on JPY
    3) mean reversion- the 200 day average is 180 currently 129)
    4) GBP bad news well factored in, and I dont believe Japans export woes are nearly so.

    1) BoE interest rate announcement tonight will compress rate dif even more, driving repatriation 9if there’s any left to come home)
    2) if major risk aversion event, JPY goes up.

    GBP/JPY might hit 120 again, but in the mid term, its headed up.

  3. Dear Ms. Kathy Lien,

    I am working with a Buyer who is currently seeking to Purchase Discounted JPY. Would you be able to Direct us to be able to Purchase on behalf of this Request.

    Please contact me at…
    [email protected] / Steven D. Claiborne Sr.

  4. I’ve seen a correlation between the dollar and the Yen, where when dollar makes gains, the Yen makes even bigger gains, and when dollar weakens, the Yen weakens more. This doesn’t happen all the time…but in major moves this correlation is strong.
    To your Success,
    [email protected]


Leave a Comment.