The Japanese yen has become one of the most unloved currencies in our universe.
In fact, it is not just unloved relative to other currencies. It now sits close to the bottom of our broader asset universe too.
Our Sentiment Matters Aggregate for JPY has fallen to the 10th percentile.
That is getting extreme.
Yen sentiment has swung from one extreme to another over the past few years: from extreme bearishness in 2024, to extreme bullishness in 2025, and now back towards extreme bearishness again.
The underlying narratives swung just as sharply. In 2024, the consensus was that the rate gap was too wide and the BOJ could not tighten enough. In 2025, the dominant view became that the rate gap was finally turning as the BOJ normalised policy and the Fed moved towards easing.
Could we be approaching another narrative and market turning point?
The point of this note is not to call the exact bottom in JPY. We may not be there. Our SMA could still fall further. The 2024 trough was lower after all. And momentum remains weak, with no sign of a turn yet.
The point is to do what sentiment analysis is good at:
- Spot when the hurdle for further downside is rising — and when the market becomes more vulnerable to “less bad” news.
- Identify the prevailing narrative and stress-test it — what is already priced, where is the consensus most confident, and what could realistically force a rethink?
Sentiment & Positioning
We always start with the data.
JPY sentiment has deteriorated sharply alongside the exchange rate.
That part is not unusual. Price and sentiment often move together.
What stands out more is the level.
At the 10th percentile, our JPY Sentiment Matters Aggregate (SMA) is no longer just below average. It is approaching a genuine bearish extreme and marks a sharp reversal over the past year.
This time last year, the yen had gone through a period of appreciation and our SMA stood around the 95th percentile.
A year before that, the picture was almost the exact opposite again: yen depreciation and the SMA close to its all-time low at the 1st percentile.
For context, the all-time lows in the SMA were reached in 2022 and 2024.
At the 10th percentile, the SMA is now closing in on its historical buy threshold at the 7th percentile.
An SMA below 7 has historically been followed by average JPY appreciation of 350bp above the historical baseline over the following year, with a 62% hit rate of above-average returns.