Investors betting that Japan will have to quit its ultraloose monetary policy are running into riskier and pricier territory as the showdown shifts to the Bank of Japan's home turf in the bond market.
Japan is now alone among major economies in its stance of enforcing near-zero interest rates, and hedge funds and momentum-chasers have made hay as the growing divergence with its rate-hiking peers has pounded the yen.
As the currency hits depths not seen since the late 1990s, wagers on further declines are being pared back, and funds have stepped directly into the path of the BOJ — to short the government bonds that it has promised to support without limit.