Yen Repatriation Risk After Quake Not as Large as Feared, Citigroup Says

The amount of yen repatriated by Japan’s investors and companies in the aftermath of the nation’s worst earthquake on record won’t be as large as some analysts estimate, according to Citigroup Inc.

Insurers may sell Japanese government bonds instead of selling overseas assets such as U.S. Treasuries to pay claims, according to Osamu Takashima, a currency strategist at Citigroup in Tokyo. The yen rallied to a post-World War II high versus the dollar today as the risk of radiation leaks from crippled nuclear plants spurred speculation insurers and investors will bring funds home.

“Insurance companies have huge balance sheets,” Takashima said in a phone interview. “However, their foreign investment share must be quite small. At first they will sell JGBs to prepare for payments.”

Any impact from Japanese pension funds on the value of the yen will be “negligible,” and Japanese banks that sell assets such as Treasuries for yen will “have little influence” on foreign-exchange markets because their holdings are hedged, Takashima said.

The 9-magnitude temblor that struck March 11 affected only a small share of investment trust assets, said Takashima, who expects investors to withdraw savings from local banks and sell government bonds before liquidating those funds.

“I don’t think Japanese investors repatriated all their money,” Takashima said. Japanese retail traders also “appear to be increasing yen shorts,” he wrote today in a research note, referring to bets a currency may decline.

Record Yen

The yen appreciated 0.9 percent to 78.90 versus the dollar at 11:47 a.m. in New York after touching 76.25, the postwar high, partly on speculation Japan will delay intervention to limit the currency’s advance.

The U.S. 10-year note yield increased for the first time in four days, rising 0.09 percentage point to 3.26 percent after touching 3.14 percent, the lowest level since Dec. 8. Yields on 10-year Japanese government bonds dropped 0.02 percentage point to 1.21 percent.

The yen may appreciate to 75 against the dollar in one or two months before depreciating to 90 as the country’s current-account surplus falls, according to Takashima.

Takashima said in the interview he spoke with “six or seven” institutional investors to gauge expectations. He declined to provide an estimate for yen repatriation.

To contact the reporter on this story: Charles Mead in New York at

To contact the editor responsible for this story: Dave Liedtka at

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