If the Japanese bring their money back home, do you think we would see a rising Japanese stock market accompany a strong yen? It would be interesting to see a move that is the opposite of recent correlations.
I think it is interesting that the Nikkei used to correlate more with a stronger yen than a weaker yen in the 1970s-80s, whereas in recent decades it has been more of an inverse relationship.
Agreed - but I think it relates to technology leadership. When you have the leading tech - assets and currencies do well, as the US has done in recent time...
Because rising JGB yields are not causing Yen to rally. When it does, then its a problem. I prefer to wait for thing to start happening before doing anything...
You argue that the US government wants to avoid a rise in JP yields. Now imagine BOJ would hike to 2% which is at the moment priced to be the case for June 28. If we assume the market pricing will realize exactly as priced right now in the future, the US will be at 4% at the same time. The differential between the two would shrink from 2.6% to 2%. Would it cause a capital flight to JP bonds (i assume you mean mostly by domestic JP investors), could be but not sure, if significant at 60 bps.
On the other hand one could easily argue that the JP government doesn't want to have a strong Yen in the first place. Imo the "reverse causality" is makes more sense.
In any case i guess everyone agrees with the fact that Yen is the release valve of BOJ being extremely behind the curve (deliberately) so the Yen has to weaken (and equities moon).
If the Japanese bring their money back home, do you think we would see a rising Japanese stock market accompany a strong yen? It would be interesting to see a move that is the opposite of recent correlations.
I think it is interesting that the Nikkei used to correlate more with a stronger yen than a weaker yen in the 1970s-80s, whereas in recent decades it has been more of an inverse relationship.
Agreed - but I think it relates to technology leadership. When you have the leading tech - assets and currencies do well, as the US has done in recent time...
Agree. Why is it a problem for another time though? That's basically Jonathan Ruffer's thesis on carry trade unwind, as I understand it.
Because rising JGB yields are not causing Yen to rally. When it does, then its a problem. I prefer to wait for thing to start happening before doing anything...
You argue that the US government wants to avoid a rise in JP yields. Now imagine BOJ would hike to 2% which is at the moment priced to be the case for June 28. If we assume the market pricing will realize exactly as priced right now in the future, the US will be at 4% at the same time. The differential between the two would shrink from 2.6% to 2%. Would it cause a capital flight to JP bonds (i assume you mean mostly by domestic JP investors), could be but not sure, if significant at 60 bps.
On the other hand one could easily argue that the JP government doesn't want to have a strong Yen in the first place. Imo the "reverse causality" is makes more sense.
In any case i guess everyone agrees with the fact that Yen is the release valve of BOJ being extremely behind the curve (deliberately) so the Yen has to weaken (and equities moon).