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Will USD/JPY move 10%+ in a single calendar month before October 2026?
The Condition
BOJ raises policy rate to 1.00% or higher by end of July 2026
Our Ensemble Estimates
Given BOJ reaches 1.00%+: Will USD/JPY move 10%+ in a single calendar month before October 2026?
Given BOJ stays below 1.00%: Will USD/JPY move 10%+ in a single calendar month before October 2026?
Causal Effect
BOJ reaching 1.00%+ worth ~15pp increase in probability of a 10%+ monthly USD/JPY move — aggressive normalization deepens hedging cost trap and risks triggering OTC institutional carry unwind cascade
Why This Matters
Tests whether aggressive BOJ normalization to 1.00%+ triggers a disorderly carry trade unwind similar to August 2024. The analysis identifies that speculative CFTC futures have flipped to net long JPY (+11K from -70K in 5 weeks), but OTC institutional carry positions remain opaque and potentially massive. A second hike compressing the US-Japan differential below 250bp would make hedged UST returns deeply negative vs JGBs, potentially triggering a cascade of institutional de-risking. The August 2024 template showed the transition from orderly to disorderly can happen in days.
Resolution Criteria
FRED DEXJPUS (USD/JPY daily exchange rate) shows a month-over-month percentage change of 10% or more in absolute value for any calendar month from March through September 2026. Calculated as |(last trading day close / first trading day close) - 1| >= 0.10.
Source Analysis
Speculative carry fully unwound in futures but OTC/real-money positions remain opaque; rate differential compression to 1.00%+ makes carry re-establishment economically precarious