Yen Gaining Strength – BBH
Research Team at BBH, suggests that part of the yen's strength reflects
the weakness of the US dollar but another part of it looks independent
of US developments.
“Although many economists and observers try tying the yen's strength to its alleged role as a safe haven, we think it is misunderstood. Among the riskiest assets, emerging market equities, or high yielding bonds, or commodities, have been rallying.
There is no compelling sign of panic, heightened anxiety, or need for a safe haven. In addition, there is scant evidence that investors are flocking to Japanese assets. Through mid-March, foreigners were net sellers of Japanese equities. It is true they have turned net buyers in April, though the amounts are modest (JPY1.7 trillion or ~$15 bln over the past four weeks, after being net sellers over the previous 13 weeks selling roughly $36.8 bln of Japanese shares).
Foreigners have been steady buyers of Japanese bonds this year, except a few weeks in March. It is a noteworthy development that has received very little attention. Who are buying negative yielding Japanese government bonds besides the BOJ? Foreign investors.”