Japan: Portfolio flows may draw more attention - BBH

According to analysts at BBH, Japan’s weekly portfolio flows reported by the MOF may draw more attention than usual.  

Key Quotes

“It is not unusual for Japanese investors to repatriate some of their overseas investments around the turn of the fiscal year.  However, what should not be lost in the seasonality were the comments by the head of the Government Pension Investment Fund (GPIF) suggesting that the recent price action has made US bonds more attractive.  Recall that previously the cost of hedging was prohibitive.”

“More interesting than the largest weekly bond sales by Japanese investors in several years, foreign investors stepped up their purchases of Japanese bonds.  The JPY1.27 trln Japanese bonds they bought was the most in six months.  Since the bonds are obviously not sought because of their high yields (Japan’s yield curve is negative out through eight years), it is interesting to contemplate the motivation.  Is it an expression of a bullish yen view?  Is it about moving toward benchmarks?  Does it have to do with the funding side?  The next week’s data may not shed light on the motivation but will show whether it was a one-off.”