Yen Rally Stalls as Japanese Investors Hold Back on Repatriation

The repatriation of Japanese money from overseas assets is being held back by uncertainty over Japan's bond yields and interest rates. The Bank of Japan has likely done enough to ward off another wave of speculative bets against the currency, with a recent rate hike and pledges to tackle inflation.

However, major investors remain reluctant to commit heavily to domestic bonds while yields are still climbing and policymakers offer few clues about how much further rates must rise. Two dovish dissenting votes at last week's meeting and a further selloff in bonds this week only reinforced the uncertainty.

The caution is slowing capital repatriation, leaving one of the world's biggest pools of overseas capital largely parked abroad for now. Shoki Omori, fixed income strategist at Deutsche Bank in Tokyo, said 'The fast-money carry trade has already been unwound; the slow-money one has not started.'