BNPP pick up on Japanese repatriation flows for the second week running

Japanese investors sold ¥607.6bn in foreign bonds, and ¥449.3bn in foreign stocks in the latest weekly MOF flow data report. That pushed the 4 week sum of purchases into repatriation.

They explain;

"Widening USD-JPY front-end rate differentials have made hedging of USD risk increasingly expensive for JPY-based investors. The data suggests that rather than scaling back the FX hedging of new flows, Japanese investors are choosing to keep their money at home."

Even so, BNPP are still looking for a moderate recovery in USDJPY on higher US yields and as the market prepares for a Fed hike.

It's a bad situation for the BOJ on two fronts. One, the BOJ have been busting a gut to get investors spreading their money overseas, and two, any repatriation is doing them no good via it's effect on the currency. Maybe some of these moves are just surrounding the possibility of a Fed hike but if they continue or grow, it's more headwinds for Captain Charisma at the head of the BOJ.

Our thanks to EFx for the note from BNPP.