A bit of news from the overnight press on the data released in Japan yesterday that Japan’s Government Pension Investment Fund (amongst other public pensions) were net sellers of about 1.8 tln yen of Japanese government bonds in the first three months of the year. Given all the chatter about the GPIF rebalancing its portfolio its notable because it may be indicative of rebalancing “sooner than expected”.
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Indeed, analysts from BNP Paribas say that if the reallocation has already started, it comes amidst two other yen-negative factors:
- Although we would be careful not to overstate the importance of a one-off JPY outflow, we believe it should be seen in the context of two key yen-negative developments: a) an upward trend in US yields and b) a deterioration in Japan’s current account position
BNP Paribas have entered a long USD/JPY position at 101.85
- The TP target: 105.50
- Stop loss at 100.65
They also give two key risks on this trade:
- That the US economy may struggle further, causing a fall in in US yields
- A rising yen should there be an escalation in political risk (in Ukraine and Iraq, for example) – noting Japan’s traditional ‘safe haven’ role, supported by Japan’s large positive foreign asset holdings
