Japanese Yen: Domestic savings shift aids JGBs and JPY – MUFG

MUFG’s Lee Hardman notes Japanese government bond yields have fallen despite higher global yields, with Japanese Government Bonds (JGBs) supported by verbal intervention from policymakers. Finance Minister Katayama and Health Minister Ueno signalled potential Government Pension Investment Fund (GPIF) portfolio review and tax-advantaged treatment for JGBs. These initiatives could redirect Japan’s large retail savings toward domestic bonds, indirectly supporting the Japanese Yen (JPY).

Policy talk underpins JGBs and Yen

"While government bond yields have risen in response to higher energy prices, it has been notable that JGB yields have fallen again overnight."

"JGBs are deriving more support from verbal intervention from Japanese policymakers indicating that they will encourage domestic investors to increase portfolio allocations to domestic assets."

"Finance Minister Katayama spoke again overnight repeating the message from late last week that “if we successfully advance our growth strategy, yen-denominated assets will become more attractive”."

"She stated that “while I have received petitions regarding these matters and cannot yet make a decision, I feel that the time has come to move forward with these initiatives”."

"Taken together the comments from overnight will further encourage speculation that Japan’s huge savings could be better utilized to provide more support for JGBs and the yen."