A return of Japanese investment money to domestic markets is already underway, but it will still take time for the massive funds that have been invested overseas to flow back in earnest. The Bank of Japan raised interest rates at its monetary policy meeting through the 18th, and according to reports it also conducted a "rate check" in the foreign exchange market, but it remains unclear how far government bond yields will rise and how much further the BOJ will need to push rate hikes. At last week's BOJ meeting, two members voted against the move from a dovish standpoint, and the further decline in the bond market this week has only strengthened the sense of uncertainty about the outlook. The benchmark 10-year government bond yield has risen by about 2 percentage points in less than two years, exceeding 3% and reaching a roughly 30-year high, and an analysis by Barclays of Japan Securities Dealers Association data showed that investors were net buyers of Japanese government bonds by 480 billion yen last month. Meanwhile, according to estimates by HSBC, Japanese banks sold about 70 billion dollars of foreign bonds this year, a sharp reversal from net buying of 35 billion dollars last year. Life insurers, which hold total assets of 438.6 trillion yen, are seen changing their asset allocations only slowly, and Aaron Hurd of State Street Investment Management noted that a full-scale return of funds may not come until 2027.
Barclays PLC
HSBC Holdings PLCBOJ hiked rates and 10Y JGB yield exceeded 3%, a ~30-year high, with uncertainty over further hikes.
BOJ rate hike and FX rate check signal yen-strengthening policy pressure.
