On the eve of the Japanese Senate election, hedge funds are shorting the yen for the first time in four months.

Before the Japanese Senate election, hedge funds shifted to a bearish position on the Japanese yen for the first time in four months, with investors concerned that a tough election for the ruling coalition could further deteriorate Japan's fiscal outlook and shake the stability of economic policies. According to the latest data from the U.S. Commodity Futures Trading Commission, speculative traders currently hold about $1.1 billion worth of yen short futures and options contracts, totaling about 12,606 contracts. This is the first time a bearish position has been seen since the end of March. According to CCTV News, polls show that the ruling Liberal Democratic Party, led by Shiroo Shiro, is in a precarious position. The latest survey shows that the approval rating for the Shiroo Cabinet has dropped to 20.8%, down 6.2 percentage points from the previous month, approaching the "downfall zone" of 20% in Japanese politics. The disapproval rating has risen to 55%, the highest since he took office. Multiple polls show that the ruling coalition of the Liberal Democratic Party and Komeito may struggle to maintain a majority. This political uncertainty is prompting investors to reassess the investment value of the yen and Japanese government bonds. Wall Street is bearish on the outlook for the yen Investment bank strategists are generally pessimistic about the performance of the yen after the election. The currency strategy team at Fuguo Bank believes that a defeat for the Liberal Democratic Party could open the door to more fiscal spending, and opposition parties pushing for a reduction in consumption tax would mean a larger fiscal deficit and pressure on long-term Japanese government bonds. The team expects that if the opposition party wins, the yen will weaken further to 150 yen against the dollar. Dowshine Securities strategists Jayati Bharadwaj and Alex Loo pointed out that the previous long positions of the yen against the dollar "seem to have been excessive and fragile," and they expect the yen to continue to be under pressure in the short term. Japanese bond market under pressure reaches multi-year highs Concerns about fiscal prospects before the election and continued uncertainty over Trump's plans to impose tariffs on major trading partners like Japan have put pressure on Japanese bonds and the yen in recent weeks. Selling of Japanese government bonds has spread to the 10-year maturity, with yields on these bonds reaching the highest level since 2008 this week, close to 1.6%. Yields on 20-year and 30-year Japanese government bonds this week reached their highest levels since 1999. The yen has fallen by about 3% in July, after a boost earlier in the first half of the year due to the weakening of the dollar caused by the start of the U.S.-China trade war, the yen had risen by nearly 10%. This article is reproduced from "Wall Street See News", author: Xu Chao; Editor GMTEight: Xu Wenqiang.