TOKYO – Japanese investors are snapping up foreign currencies, local stocks and US Treasuries after the country’s new central bank chief damped speculation that he will start normalising policy.
Among their investments, Citigroup clients are buying United States and Australian dollars to profit from their interest rate premiums over the yen, said Mr Keita Matsumoto, head of financial institutions sales and solutions at Citigroup Global Markets Japan.
Their activity shows that clients have shifted bets on changes to the Bank of Japan’s (BOJ) ultra-easy policy to as late as the second half of next year, he said.
The vast majority of clients are “determined to wait and see” before investing in Japanese government bonds (JGBs), Mr Matsumoto said in an interview in Tokyo. “We are now seeing more interest in foreign exchange, Japanese equity or the US Treasury market. Probably the most interesting is the foreign exchange market.”
The change in client strategy shows how the dovish tone taken by new BOJ governor Kazuo Ueda has filtered through markets. The former academic said last week that it is “appropriate” to carry on with his predecessor’s policies, suggesting the BOJ will retain its position as the last major central bank with negative interest rates for some time yet.
While investor interest in JGBs may have cooled for now, Citigroup has been preparing for a longer-term pickup since last year, Mr Matsumoto said.
These moves have paid off as the bank has gained market share, with money managers starting to shift into JGBs from overseas bonds over the same period. BLOOMBERG
