JPY Came & Saw & Left

The Japanese are slow and in fact, latest data points to Japanese net selling of offshore equities and bonds since this whole BoJ Abenomics took off. Why not ? Look at the sterling performance of the Nikkei ?

NIKKEI VS WORLD

“In the second week post BoJ, Japan investors continue to be net sellers of foreign assets. Japanese investors sold JPY863bn of foreign bonds, 28bn of foreign equities, and 45bn of short term instruments (vs net sale of 333bn in bonds, 158bn in equity and 59bn in short term instruments the week before). For April so far, Japan investors net sold 2335bn of foreign bonds, much more than the amount they sold in the first few weeks of March (210bn).”

The big boys are taking their time though.

Insurers Pivot Toward Foreign Bonds
TOKYO (Nikkei)–Top Japanese life insurers’ holdings of foreign bonds are expected to grow by at least several hundred billion yen in fiscal 2013 and possibly more than 1 trillion yen should domestic bond yields stay near rock bottom.
Nippon Life Insurance Co. said Monday it will curb new purchases of Japanese government bonds and, if JGB yields remain low, buy more foreign debt. This would mark an about-face from fiscal 2012, when Nippon Life cut foreign bondholdings by 160 billion yen.
Mitsui Life Insurance Co. and Fukoku Mutual Life Insurance Co. also revealed plans to increase foreign bondholdings by 50-60 billion yen and about 40 billion yen, respectively. Meiji Yasuda Life Insurance Co., Daido Life Insurance Co. and Taiyo Life Insurance Co. all plan to invest more in foreign debt should Japan’s benchmark long-term interest rate, now at 0.6%, remain low.” Source Reuters

There is one thing many of us do not really think about. And that is the LIMIT to the investment allocations into any one country that RBS pointed out in one of their reports.

The countries with the biggest market size will tend to benefit from higher allocation limits and as it is, ASEAN and the rest of Asia have already benefited heavily from past inflows leaving little room for future investments if they do not beef up their market sizes.

Biggest beneficiaries will remain the countries with the largest deficits and that have had been shunned for the same reasons.

Some studies based on market size show that limits of bond allocation could be as follows.

China 2%
Indonesia 1%
India 5%
Korea 3%
Malaysia 1%
Philippines 0.5%
Singapore 0.8%
Thailand 1%
Taiwan 1%
Germany, France, Italy,UK, Australia, New Zealand and US >70%.

Japan happens to be unallocated in most of the 70% category, except maybe for Australia.

Latest news…..

”     April 26 (Bloomberg) — Japanese investors sold foreign bonds for the longest stretch in three years and life insurers said they plan to hedge future purchases against a rebound in
the yen, stalling the currency’s drop to 100 per dollar.
Domestic investors cut holdings of overseas debt for a sixth-straight week, the longest streak since January 2010, Ministry of Finance data showed yesterday. Nippon Life Insurance
Co. and Sumitomo Life Insurance Co. said they will seek to offset foreign-exchange moves when venturing abroad as yields in Japan stay low. Ten-year Treasuries yield 1.59 percent after accounting for hedging costs, versus the 0.595 percent rates for same-maturity Japanese government bonds.”

Quite recalcitrant.

BoJ coming up. Perhaps if USDJPY does the magic 100, they would change their minds ?