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2026-09-18 12:26:09
[Japan's Interest Rate Hike May Change Capital Flows, Testing the Attractiveness of US Assets] 1. The Bank of Japan raised its benchmark interest rate to 1.25% and signaled further rate hikes. This policy shift could have broad spillover effects, impacting markets outside Japan. Japanese investors currently hold approximately $2.5 trillion in US stocks, bonds, and other financial assets, roughly half of their $5 trillion overseas portfolio. 2. Rising Japanese interest rates could attract capital repatriation, slowing or even reversing previous capital flows that supported US and global markets. Rory Green, Head of Asia and Emerging Markets Research at GlobalData TS Lombard in London, aptly described it: "The yen's supertanker is turning." 3. However, some analysts believe that a moderate rise in Japanese interest rates may not be enough to prompt a large-scale withdrawal of funds from Japan. They can still invest in US tech stocks or buy other bonds with higher yields than Japan. Norihiro Yamaguchi, Chief Japan Economist at Oxford Economics in Tokyo, stated that a large-scale repatriation of funds from US Treasuries to Japan is not expected at present. Only after the Bank of Japan's future interest rate path becomes clearer will Japanese investors be more likely to increase their allocation to domestic assets.
