30 Mar 2016
Japanese buying to support AUD? – Westpac
Robert Rennie, Research Analyst at Westpac, suggests that with more central bank QE drives more demand for high yielding assets around the world and with 10yr JGBs yielding -8bps, increased Japanese buying of A$ assets should be expected in the new Japanese financial year beginning April 1.
Key Quotes
“Indeed, rather than the common Japanese profit taking into the end of financial year, we are seeing signs of acceleration in Japanese buying of foreign assets. Using weekly MOF data as the source, Japanese investors bought ¥10.99tn (A$128bn) of foreign assets in Q1. That would be close to the record set back in 2010.
Demand for foreign bonds in the last quarter hit ¥8.19tn (A$95bn). That is a fresh high back to October 2010. Trying to forecast what Japanese investors might do in the coming weeks and months is fraught with risks.
We should be seeing a pickup in the pace of Japanese buying in the months ahead. This seems pretty obvious with very rapid flattening in the JGB yield curve as BoJ QE continues to impact; the very aggressive pickup in terms of Japanese demand for foreign assets; Australian yields remaining super attractive and AUD/JPY sitting towards the lower end of the range seen over the last 5 or 6 years.”
Key Quotes
“Indeed, rather than the common Japanese profit taking into the end of financial year, we are seeing signs of acceleration in Japanese buying of foreign assets. Using weekly MOF data as the source, Japanese investors bought ¥10.99tn (A$128bn) of foreign assets in Q1. That would be close to the record set back in 2010.
Demand for foreign bonds in the last quarter hit ¥8.19tn (A$95bn). That is a fresh high back to October 2010. Trying to forecast what Japanese investors might do in the coming weeks and months is fraught with risks.
We should be seeing a pickup in the pace of Japanese buying in the months ahead. This seems pretty obvious with very rapid flattening in the JGB yield curve as BoJ QE continues to impact; the very aggressive pickup in terms of Japanese demand for foreign assets; Australian yields remaining super attractive and AUD/JPY sitting towards the lower end of the range seen over the last 5 or 6 years.”