Foreign investors remain net long JPY but at reduced levels, requiring BoJ tightening and reforms to sustain inflows, BNY analysts note.
Foreign exposure to the Japanese yen has not increased significantly despite coordinated intervention, with investors still net long JPY but at much lower levels than in the first half of 2026. Analysts argue that sustained demand for the yen depends on credible follow-through from the Bank of Japan, including policy tightening, fiscal consolidation, and structural reforms to raise real rates and attract portfolio inflows.
Current JPY holdings remain net positive but are far below H1 2026 levels, with no discernible impact on cross-border exposure apart from a single strong volume day last Friday. Japanese government bonds are seeing marginal demand, while equities remain largely passive and under-supported.
Intervention has provided temporary relief but lacks the conviction needed to rebuild foreign JPY holdings without domestic policy changes. Treasury Secretary Scott Bessent acknowledged that intervention signals market intent but emphasized the need for broader policy action.