Each time news on North Korea flares up the yen catches a bid, but that rankles with a few traders, and the questions on 'safe haven' as missiles fly overhead are raised.
This piece on Bloomberg canvasses a few opinions, and, as you'd expect, there is no agreement! :-D
Where the experts disagree is the yen's path in the scenario of an actual outbreak of hostility. Here are some of the lines of thinking:
- Traders who borrowed yen at Japan's rock-bottom borrowing costs to invest in higher-yielding currencies would quickly unwind their positions, sending the currency higher in a knee-jerk reaction
- Foreign investors, who hold about30 percent of Japan's stock market -- some 175 trillion yen ($1.6 trillion) as of the end of March -- would pull funds out, spooked by fears of damage to the nation from an attack and the hit to corporate earnings
- Japanese themselves would take money out of the country, for the same reasons as foreign stockholders
- At the same time, Japanese insurers and manufacturers would bring overseas funds back home to pay for domestic damage
- Treasury yields fall as investors seek safer assets, causing the dollar to weaken and boosting the yen
- Expectations for U.S. defense spending improve prospects for American growth, strengthening the dollar and driving down the yen
And, there is plenty more! The link is here and is an interesting read
