Japanese investors have begun repatriating funds, but uncertainty over bond yields and the Bank of Japan's rate path is delaying a larger shift from overseas assets. That pause limits a sustained yen rally; the yen traded near 159 per dollar Friday.
Japan's 10-year government bond yield has risen about two percentage points in under two years to above 3%, a 30-year high. Barclays' analysis of Japan Securities Dealers Association data showed investors bought 4.8 trillion yen of sovereign debt last month, the largest net purchase in three months. HSBC estimates Japanese banks have sold about $70 billion of foreign bonds this year, after buying $35 billion last year.
Japan's finance minister has encouraged the $1.8 trillion Government Pension Investment Fund to increase allocations to local markets; analysts say a pivot could prompt other domestic investors to follow. Life insurers hold 438.6 trillion yen ($2.78 trillion) in assets, but published portfolio figures do not make clear how much they may reallocate. State Street's Aaron Hurd said repatriation could gather pace in 2027 if investors see Japanese yields as having peaked.
