Business Maverick: Global bond bulls’ biggest BOJ fear already well under way

to determine whether he is a hawk or a dove. But beyond the yield volatility that any policy decision may soon trigger, the steady selling of overseas bonds in favour of local alternatives by Japanese investors has already begun in earnest and looks unlikely to stop.$181-billion of foreign debt and poured ¥30.3 trillion into the local government bond market, according to the latest Ministry of Finance and Japan Securities Dealers Association data.

“When they finally let rates go, domestic institutions in Japan who’ve been waiting and waiting for higher returns could pounce on JGBs,” said Amir Anvarzadeh, a strategist at Asymmetric Advisors in Singapore, who has tracked Japanese markets for three decades. With those costs still sky high, even Japan’s artificially capped 10-year yield of 0.5% is more attractive to a local fund manager compared to the minus 1.3% yen-hedged yield they would get from equivalent Treasuries.

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