This is based on the view that most of the fall in the pair in the past few months has occurred during outside Tokyo trading sessions , and instead USD/JPY has had a tendency to rise in Asian trading sessions. At this juncture, there are no strong signals that Japanese investors are increasingly repatriating their capital from overseas to Japan , which would be evident from the MOF’s weekly portfolio data, high-frequency NISA flows (Fig. 9 ), and retail investors’ FX margin trade position data.
Moreover, the upcoming release of the GPIF’s new policy portfolio for the fifth medium-term plan (five-year plan) from FY2025, due by end-March 2025, is unlikely to show a large change in the asset weightings from the existing plan , in our view. While March is the time when we tend to see strong repatriation flows by Japanese corporates (Fig. 10 ), there is little evidence that USD/JPY had performed weakly in March in past years.
Overall, we believe we are not yet at an inflection point where local Japanese investors will be increasingly buying JPY, and in this regard, we think the risk of the BOJ suddenly turning more dovish by strongly reacting to a potentially marked JPY appreciation is small, at this point. That said, we note that the exchange rate factor continues to have a relatively high sensitivity in the BOJ’s policy reaction function, thus it’s a factor we should not overlook any time.
