USD/JPY: Greater outflows to foreign bonds to provide support for the pair – MUFG

Japanese investors have been largely absent from the foreign bond markets this year. That may be changing. Consequently, the USD/JPY pair could find a tailwind from a big jump in foreign bond buying, according to economists at MUFG Bank.

See: USD/JPY needs to erode the 110.45 mark to enjoy further gains – SocGen

Japan foreign bond purchases jump notably

“The weekly MoF data released on Thursday revealed JPY1,761.4 B worth of foreign bond purchases – a year-to-date record and the largest since November last year. The passing of time and the approach of the end of the fiscal half-year may be prompting an increase in buying.” 

“Foreign investor buying of Japanese stocks recorded a third week of buying although the pace of buying slowed. The total reported last week was the largest since April and covered the day PM Suga announced his effective resignation. But there was limited follow-through in buying in this week’s data and we are sceptical of there being any meaningful change in policy direction that will fuel any great shift in cross-border flows.” 

“Greater outflows to foreign bonds could play a role in providing support for USD/JPY, especially at lower levels.”