Japan's Bond Market Shift Sparks Uncertainty Over Yen Strength

The Japanese bond market is experiencing a shift, but investors are still cautious before repatriating their funds. The central bank raised its policy rate last week to combat inflation and curb speculative bets against the yen.

Japanese capital has begun returning home, but a large-scale repatriation of overseas investments has yet to occur. Investors are waiting for Japanese bond yields to peak and gauge how much further the Bank of Japan will raise interest rates.

According to Shoki Omori, bond market strategist at Deutsche Bank in Tokyo, 'what remains now are structural factors: Japanese pension funds and households holding unhedged overseas assets.' The yen's relentless decline may be over, but a sustained strengthening has yet to begin.