Capital flows data buoys Yen

The most recent data on Japanese capital flows paints a picture of increasing repatriation of Japanese capital. In other words, Japanese people and businesses are divesting from overseas assets and parking their money in Japanese securities. Analysts have offered a couple explanations for this trend. First, yields on Japanese bonds have been growing as the Central Bank prepares to lift interest rates, and Japanese equities are approaching valuations left unseen for years. Perhaps, notoriously conservative Japanese investors are growing more confident in the strength of domestic asset markets. Second, and equally plausible, is that Japanese companies are repatriating profits earned overseas for tax purposes. Either way, the Yen will benefit. The Financial Times reports:

Data released on Friday by Japan’s Ministry of Finance revealed that Japanese investors sold a net Y1,480bn of foreign assets in the week to March 17, a six-fold increase on the week before.

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