2 hrs ago
Japanese Money Repatriation Could Pressure Global Risk Assets
Manish Banthia said Japanese investors may move some money back to Japan.
They currently invest in assets such as US government bonds and stocks.
If Japanese bonds become more attractive, they may sell some overseas investments.
A stronger yen could also encourage this shift.
Selling many assets at once could put pressure on markets around the world.
However, this may not cause much panic if the yen rises in an orderly way.
Scott Bessent said the Bank of Japan could use a Federal Reserve facility to borrow money instead of selling assets.
That option could reduce the effect on global financial markets.
Manish Banthia said Japanese money moving back home could affect global risk assets.
Japanese investors hold overseas assets including US Treasuries and equities.
More attractive local bonds and a stronger yen could encourage overseas investments to reverse.
A disorderly reversal could reduce global liquidity and trigger market panic.
Scott Bessent said the FIMA facility could let the Bank of Japan borrow from the Federal Reserve instead of selling assets during currency intervention.
- Who
- Manish Banthia of ICICI Prudential Asset Management Company discussed the risk; Scott Bessent also commented on a possible Federal Reserve facility for the Bank of Japan.
- What
- Japanese investors could reverse some overseas investments as domestic bonds become more attractive and the yen appreciates.
- Where
- The potential effects involve Japan, US Treasuries, US equities, and global financial markets.
- When
- Scott Bessent spoke about the FIMA facility recently; no specific date was provided.
- Why
- Japanese money could return home, while borrowing through the FIMA facility could help the Bank of Japan intervene without selling assets.
Market-risk concern
Liquidity-stabilization case
Effect of Japanese repatriation
Market-risk concern
If Japanese local bonds become more attractive and the yen appreciates, investors could sell overseas assets, potentially pressuring global risk assets and liquidity.
Liquidity-stabilization case
If the yen appreciates in an orderly manner, the shift may occur without significant market panic.
Currency-intervention funding
Market-risk concern
Selling assets to support currency intervention could amplify pressure on global markets.
Liquidity-stabilization case
Scott Bessent said the Bank of Japan could use the FIMA facility to borrow from the Federal Reserve rather than sell assets, potentially neutralizing much of the impact.
Key facts
- Analyst
- Manish Banthia
- Firm
- ICICI Prudential Asset Management Company
- Overseas assets mentioned
- US Treasuries and equities
- Potential trigger
- More attractive local bonds and an appreciating yen
- Possible market effect
- Reversal of overseas investments could affect global risk assets and liquidity
- Alternative intervention method
- The FIMA facility could allow the Bank of Japan to borrow from the Federal Reserve
- US official cited
- Treasury Secretary Scott Bessent
Sources
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