The rise in Japanese holdings of foreign bonds had an enormous impact on global markets between 2011 and 2020. Now, global markets will have to adapt to a reduction in Japanese demand.
Alex & Brad, this is a great piece - a ton of detailed analysis. Thanks very much for your hard work. While I am in no position to dispute your assessment (overall) of 'low probability of catastrophe', it is also clear that your report enumerates more than one source of 'low probabilities of catastrophe'. Moreover, there is quite a bit of opaque decision-making going on here.
Thanks Meyrick. I think the way that I think about it is that to some extent the risks are offsetting/bounded. For me, one really has to believe that the BoJ is going to move rapidly to a much higher rate structure and keep it there on a sustained basis.
While that may be the direction of travel, the speed and magnitude of the changes in BoJ policy may be less dramatic as shown by the latest "hold."
As for the opaque decision making, I think I am a bit less concerned about the "public sector" nature of the shift into foreign assets over the last decade than Brad.
I find GPIF to be fairly transparent tbh. See also here for more on that:
Postbank is a bit opaque I suppose, but if you know where to look and make it your business to do so I think the foreign asset allocation decision was widely covered at the time (mid-2010s).
It would of course be nice if the BoP data was a bit more clear on which investor types are ultimate beneficiaries, but in the scheme of things Japanese flows data is about as high quality as anyone else.
Alex & Brad, this is a great piece - a ton of detailed analysis. Thanks very much for your hard work. While I am in no position to dispute your assessment (overall) of 'low probability of catastrophe', it is also clear that your report enumerates more than one source of 'low probabilities of catastrophe'. Moreover, there is quite a bit of opaque decision-making going on here.
Thanks Meyrick. I think the way that I think about it is that to some extent the risks are offsetting/bounded. For me, one really has to believe that the BoJ is going to move rapidly to a much higher rate structure and keep it there on a sustained basis.
While that may be the direction of travel, the speed and magnitude of the changes in BoJ policy may be less dramatic as shown by the latest "hold."
As for the opaque decision making, I think I am a bit less concerned about the "public sector" nature of the shift into foreign assets over the last decade than Brad.
I find GPIF to be fairly transparent tbh. See also here for more on that:
https://twitter.com/travislundyasia/status/1615179644264939520
Postbank is a bit opaque I suppose, but if you know where to look and make it your business to do so I think the foreign asset allocation decision was widely covered at the time (mid-2010s).
It would of course be nice if the BoP data was a bit more clear on which investor types are ultimate beneficiaries, but in the scheme of things Japanese flows data is about as high quality as anyone else.