Yen strength still hinges on BOJ hike, not capital repatriation (or intervention!), Goldman says
Goldman's note adds a capital flows dimension to a yen debate that has so far centred on intervention and rate differentials, and the read is that Tokyo's push to redirect investment home has not yet changed actual investor behaviour. Ministry of Finance data showing continued sizable net purchases of foreign bonds in July suggests any policy driven repatriation shift remains aspirational rather than realised, reinforcing Goldman's existing skepticism that better returns abroad will keep pulling Japanese capital out regardless of domestic policy signalling. That matters for the broader yen thesis running through recent coverage, since it implies unhedged repatriation is unlikely to be the mechanism that delivers sustained yen strength. Instead, Goldman ties the more credible path to yen strength to a Bank of Japan rate hike next month, consistent with the view already expressed by MUFG and a Reuters analyst this week that intervention alone offers only temporary support and durable yen strength requires genuine narrowing of rate differentials rather than a capital flows homecoming.
---
Tokyo wants Japanese money to come home, but Goldman says the data shows it has not yet, leaving a BOJ hike as the more credible route to a stronger yen.
Summary:
- Goldman Sachs economists say Japanese investors continue to seek foreign investments despite Tokyo's stated plans to redirect capital flows toward domestic markets.
- A Ministry of Finance report cited by Goldman shows continued net purchases of foreign bonds at a sizable pace in July.
- Goldman says it may take time for any policy driven shift to show up in the data, so it is too early to rule out, but says its existing skepticism toward large scale unhedged repatriation flows looks fair so far.
- Goldman attributes that skepticism to better return prospects available to Japanese investors abroad relative to at home.
- Goldman says a Bank of Japan interest rate hike next month would help deliver longer term strength in the yen.
Japanese investors are continuing to direct capital toward foreign markets despite Tokyo's stated ambitions to redirect investment flows domestically, according to a note from Goldman Sachs economists. The bank points to a Ministry of Finance report showing continued net purchases of foreign bonds at a sizable pace in July, evidence that any policy driven shift toward repatriation has yet to materially change investor behaviour.
Goldman said it may take time before such a policy shift becomes visible in the flow data, and stopped short of ruling out a change altogether. But the bank said its existing skepticism toward the likelihood of large scale unhedged repatriation flows, based on the view that better return prospects abroad continue to outweigh the pull of domestic redirection efforts, still looks fair given the latest data.
The note adds a capital flows dimension to a broader debate that has played out across recent commentary on the yen, much of which has centred on the limits of intervention as a durable support mechanism. Where MUFG has argued that joint intervention historically only delays rather than reverses currency trends until fundamentals shift, and a Reuters analyst has suggested Japan's more recent passive stance may leave the yen exposed to further testing by short sellers, Goldman's note points to a related conclusion from a different angle. If Japanese capital is not coming home despite policy encouragement to do so, then repatriation is unlikely to be the channel through which sustained yen strength eventually arrives.
Instead, Goldman ties the more credible path to yen strength to monetary policy itself, saying a Bank of Japan interest rate hike next month would help deliver longer term support for the currency. That view is broadly consistent with the fundamentals based argument already running through this week's coverage, that genuine and lasting yen strength is more likely to come from a narrowing of rate differentials between Japan and the United States than from either intervention or a shift in where Japanese investors choose to park their capital.
Taken together, the note reinforces a consistent thread across recent research, that market participants across several houses are converging on the view that the BOJ's own policy path, rather than intervention or capital flow redirection, is the more reliable determinant of where the yen goes from here.
This article was written by Eamonn Sheridan at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
FX初心者には必須 無料のうちにGET！
