The Bank of Japan is very likely to raise interest rates this month, but guess what? Global traders are still aggressively shorting the yen.

At first glance, this sounds bizarre—after all, conventional wisdom says that rate hikes should benefit the local currency, right? But the market isn’t following the script. Traders at Bank of America and Nomura Holdings have recently revealed that investor positions are still skewed toward betting against the yen. Over at Citi, they’ve created a “Yen Pain Index,” which shows that negative sentiment toward the yen is still spreading.

The core of the contradiction is actually pretty simple: Even though BOJ Governor Kazuo Ueda has hinted at possible rate hikes, Japan’s yield expectations remain far below those of the US. With such a wide interest rate gap, capital naturally flows to where returns are higher. The head of G-10 currency trading for Bank of America in Asia Pacific put it even more bluntly—unless the BOJ suddenly pulls off a “blockbuster” policy move, USD/JPY will probably keep rising through the end of the year.

Behind this wave of action is the market’s clear disregard for “mild rate hikes.” Investors aren’t looking for symbolic moves—they want decisive action that can truly narrow the interest rate gap and shift capital flows. So here’s the question: Does the BOJ dare to take aggressive measures, or will it keep making incremental adjustments and watch as the yen continues to be shorted?

What do you think about this “anticipated rate hike but continued shorting” trend—is the market overly pessimistic, or does the BOJ really need to come out with more aggressive policies?