Japanese Asset Repatriation Stalls Amid Rate Hike Uncertainty

The repatriation of Japanese assets from overseas is underway, but at a slower pace than expected due to uncertainty over future interest rates and bond yields.

A rate hike by the Bank of Japan last week, coupled with pledges to tackle inflation, may have deterred another wave of speculative bets against the yen. However, major investors remain cautious about committing heavily to domestic bonds while yields are still climbing.

Japanese pensions and households holding overseas assets unhedged represent a significant portion of the remaining capital, according to Shoki Omori, fixed income strategist at Deutsche Bank in Tokyo.

The yen has given up most of its gains from early September, trading near 159 per dollar on Friday. Analysts say short sellers have retreated as speculative positioning in the yen flipped from a deep net short to the largest net long since July 2025 at $9.7 billion in just two weeks.

A challenge for the yen is that major central banks have begun raising rates to tackle inflationary pressure, suggesting interest-rate differentials with Japan are unlikely to narrow soon.