The Japanese yen surged against the U.S. dollar to its highest level in two months, rising approximately 1.1% to break through the 154-yen level. This movement has sparked speculation about potential intervention by Japanese authorities to support the yen, reminiscent of the 2024 interventions when Japan purchased nearly $100 billion in yen. Despite the yen's rise, the anticipated unwinding of yen carry trades has not materialized. The interest rate differential between the U.S. and Japan remains significant, with the U.S. federal funds rate at 3.64% and Japan's policy rate at 0.75%, providing a cushion against exchange rate fluctuations. Speculative positions in yen remain net short, indicating that large-scale withdrawal of arbitrage capital has not occurred. The Maitong MSX Institute notes that while the interest rate differential's appeal has decreased, the structural changes in arbitrage trading, such as the use of foreign exchange swaps, have made these trades less visible. The market remains stable, with no signs of a forced liquidation, as the conditions for a significant unwinding of carry trades have not been fully met.