Making sense of asset flows and the yen

Reconciling the slide in Japan’s currency with big flows into its stock market from abroad and a perception that the appeal of foreign bonds to Japanese investors has waned in response to high hedging costs is easier to do once securities transactions into and out of the country are considered in the round. Regardless, we forecast that the yen will strengthen in the second half of 2023 as appetite for risk wanes.

In view of the wider interest we are also sending this Asset Allocation Update to clients of our FX and Global Markets services.