Japan's Bond Yields Stall Repatriation Rush

The Bank of Japan's rate hike last week has likely stemmed the tide of speculative bets against the yen, but investors remain cautious about repatriating their assets to domestic bonds.

Japanese bond yields have surged two percentage points in under two years to a 30-year high above 3%, making it less appealing for investors to hold overseas debt. Major investors are reluctant to commit heavily to domestic bonds while policymakers offer few clues about how much further rates must rise.

'Nobody wants to catch the falling knife,' said Shoki Omori, fixed income strategist at Deutsche Bank in Tokyo. Investors bought 4.8 trillion yen of sovereign debt last month, but life insurers, which hold ¥438.6 trillion in assets, move slowly.