Japanese and investors following them may have purchased about $13.5 billion of non-Japanese bonds since the Bank of Japan announced its unprecedented stimulus last week, 10 times more than the previous period, according to a Societe Generale SA estimate.
Speculation has intensified that money will flow out of Japan in search of higher yields elsewhere after BOJ Governor Haruhiko Kuroda said April 4 that the central bank will double its monthly bond purchases to 7.5 trillion yen ($76 billion). He reiterated today his pledge to achieve the bank’s 2 percent inflation goal. Japan’s Ministry of Finance is scheduled to report its net investment by major investors data today. Those holders sold a net 117 billion yen in the week ended March 29, Bloomberg data show.
Societe Generale’s estimate is based on a “deep extrapolation” of South Africa’s daily bond flows and by applying that data to a 6.6 percent Pacific Investment Management Co. allocation, according Sebastien Galy, a foreign-exchange strategist in New York at the bank. The rand has rallied 3.5 percent to the dollar this month.
“If you’re an investor and you have to make a re-allocation, you make a re-allocation along your entire benchmark,” Galy said today in a telephone interview. “There are few places that actually give you flow information.”
The yen fell 0.6 percent to 99.60 per dollar at 9:57 a.m. New York time after reaching 99.72, the weakest level since May 2009. Japan’s currency dropped 0.7 percent to 130.42 per euro after declining to 130.51, the least since January 2010.
“The demand from Japan is a mix of life insurers, asset managers and banks,” Societe Generale wrote today in a research report. “Retail investors are only a small part of total flows.”