Japan has pushed interest rates to their highest level in 31 years. This move is now influencing where $5 trillion goes.
Money recognizes returns, not hometown. In recent years, Japan’s interest rates were so low they felt like they were being given away, so huge amounts of yen flowed out to buy U.S. Treasuries, stocks, and property. Now that the interest at home has risen, overseas money has to make a calculation: should it keep earning abroad, or bring it back home to live off the interest.
Bringing it back isn’t a small shift. Markets that have long been “fed” by cheap yen—long-end U.S. Treasuries, emerging market stock markets—don’t lack money; they lack cheap patience. Once patience gets more expensive, the first things that can’t withstand it are always the ones with the longest duration and the longest stories.
The Bank of Japan says it will keep raising rates. Whether it’s a real increase or a pretend one, don’t look at what it says with its mouth—look at the data on capital flows over the next two quarters: will Japan’s overseas securities investment continue to see net outflows, or will it turn and flow back in. That’s the figure I think you should focus on most.
Scan the QR code below 👇 to join the group. Every week, the group will go through the main central banks’ rate paths and cross-border capital flows.
#日元 #宏观 #利率
Money recognizes returns, not hometown. In recent years, Japan’s interest rates were so low they felt like they were being given away, so huge amounts of yen flowed out to buy U.S. Treasuries, stocks, and property. Now that the interest at home has risen, overseas money has to make a calculation: should it keep earning abroad, or bring it back home to live off the interest.
Bringing it back isn’t a small shift. Markets that have long been “fed” by cheap yen—long-end U.S. Treasuries, emerging market stock markets—don’t lack money; they lack cheap patience. Once patience gets more expensive, the first things that can’t withstand it are always the ones with the longest duration and the longest stories.
The Bank of Japan says it will keep raising rates. Whether it’s a real increase or a pretend one, don’t look at what it says with its mouth—look at the data on capital flows over the next two quarters: will Japan’s overseas securities investment continue to see net outflows, or will it turn and flow back in. That’s the figure I think you should focus on most.
Scan the QR code below 👇 to join the group. Every week, the group will go through the main central banks’ rate paths and cross-border capital flows.
#日元 #宏观 #利率
