Xponance, Inc. reposted this
Assistant Portfolio Manager at Xponance & Chairman of the Board, Association of Professional Fund Investors
This quarter, I take a (very) deep dive look at the asset allocations of Japanese investors and find strong evidence that the tide has turned and the long awaited unlocking of Japanese household cash hoards may be upon us, while Japanese institutional investors are at least unlikely sellers of equities, and some are still potential marginal buyers of equities, and likely marginal buyers of JPY bonds. Xponance, Inc.
Thanks for sharing!
Great work
Interesting!
Treasury Front Office Manager at MC Finance & Consulting Asia Pte Ltd
2moDear Adam (and Tina), Thanks for the insightful piece! Please pardon my ignorance. I have a question about the part on hedging cost, in particular chart 6. I cannot reconcile the rising hedging costs/yield pick up and the level of holdings of US Treasuries by Japanese investors. I understood from the title and the axes of chart 6, the light and dark blue lines shows the yield pick ups for UST, FX hedged and unhedged, respectively. The light blue line showed the yield pick up for UST unhedged, in a general uptrend and rose to a high of 4% at 2023 vs FX hedged - 2%. Shouldn't the yield pick up result in Japanese's holding of UST? However, it was mentioned hedging costs have been increasing since 2011. This should result in lower levels of Japanese's holdings of UST? I referenced the following: (1) In footnote 4: "... but prior PGM reporting shows the prior peak in hedging costs was in 2019...", and (2) in the paper: "... the costs of hedging foreign debt in Japan has also surged to its highest level since at least 2011 (see Chart 6). This has led to the sharpest exodus from U.S. Treasuries for Japanese investors since at least 2005 (see Chart 7)..." I am not sure if I have misinterpreted anything. Thank you in advance!