日元急贬至156引发干预担忧及日本养老金回流预期

Let's go. Let's start with the yen. Um, what do we think might be behind this latest yen move? Where do you think the likelihood of intervention is at the moment? Yeah, I think the issue is with intervention. And we never know until after the fact. And the market gets so nervous and jumpy. Sometimes when you get to key levels, the market defends those key levels for the Bank of Japan. So we've seen that previously. Ah for more on two authorities rather I mean what we've seen is a sharp move lower.

We've gone from 160 to 158. And so that key 160 level is really what people were nervous about, whether or not you'd get intervention there. I think the worry as well is you now have U.S. involvement. So when you have unilateral intervention, it typically doesn't work very well. It doesn't create sustained appreciation. Your currency, because you have a limited amount of FX reserves or dollars or euros or whatever it may be to sell to buy your currency, in this case, the yen.

When you have multilateral intervention, that's more convincing. The U.S. has loads of dollars that it could use. So if the U.S. is involved in a more concerted way than last time, as in last time, the involvement was selling euros, which they don't have a lot of to sell. So that's not convincing. Then you could see a really big move. And I think that's really the worry for markets is you get when you get that appreciation will be quite significant, whether it be because of the macro story in the U.S. changing U.S. involvement, or something more convincing from a tightening perspective in the O'Jays outlook.

And the last time around when we did have a multilateral intervention, we did get indication of us reasonably quickly afterwards. But as we say, no, nothing. And those signs at the moment, and just as an indication of how fast this is moving, the UN is now at the 156 handle, hitting its lowest level in a month against the dollar. The other thing that's in the background of this, too, of course, is the next Bank of Japan meeting.

We had some commentary out yesterday from one of the more hawkish policymakers. How are investors thinking about that right meeting? I think there's a lot of apprehension over whether or not you'd actually get an oversized hike. So that's what the commentary over the last 24 hours has been. Maybe you get 50 basis points rather than 25 basis points. Now that's a big acceleration in their tightening cycle. We've also though seen big accelerations previously.

It used to be that a normal hike for the Bank of Japan was ten basis points. And now it's 25 basis points. The pace now is 25 basis points every six months in the market. Saying that's not convincing enough to find the currency, particularly when you have hiking cycles elsewhere. So you do need to go faster in terms of more than every six months where you need to go larger. Now it's has has a more aggressive hawkish path priced in in the last few months as you've had more pressure, particularly from the U.S. side, on sustaining that currency appreciation, on having a Bank of Japan policy that's hawkish enough to support the currency.

Um, so there's around 100 basis points price over the next 12 months. And you have seen edging over for the September meeting. 25 basis points. It's something like 28 basis points this morning. But they're just not convinced yet. And I think if you did get that outside move, it would be significant appreciation that you'd see. And there's clearly nervousness over what that actually means for the currency direction. I mean, Scott, to take us back to sort of the initial reasoning behind the sort of multilateral intervention Japan and Japanese funds hold a lot of foreign debt, and the US seem to have been potentially quite worried about that.

Now, there's quite an unusual meeting from Japan's Government Pension Investment Fund this morning. Can we glean anything from that? Yeah. I mean, it's quite interesting because the Japanese pension funds own huge amount of assets. And so what they do impacts markets quite significantly. And in particular, they only do a review every five years. Now that last review was in 2025. So it's very slow moving typically. And we've had this unusual meeting.

And it's been prompted by calls from the Prime Minister for them to invest more domestically. Now Japanese equities have gotten significantly more attractive. Japanese bonds have as well. From a yield perspective, you're finally getting income there. But they haven't made that transition really back to Japanese bonds. Now, historically, when it's government motivated, you can get quite big. Jeff. So in 2014 you went the other way.

And that I think the allocation went from 60% in domestic government bonds to 35%. So that is a big shift that really impacted markets. And so if we do get it, it's quite significant. It probably caps doubles. It means that more money isn't invested abroad. It's invested locally. And that's a support for the currency as well. I think though, the worry is where is that money invested now? It's invested in U.S. treasuries.

Its invested in French government bonds. And so when it comes back, that's putting pressure on those markets. I mean, how much do we need to be worried about that? Because when we go back to Scott Barton talking about intervening, intervening in the US Treasury markets and, and the coordinated yen intervention as well, that was all about, you know, trying to bring down yields. But if they're going to start selling them off, we're going to see moves in the other direction.

Yeah, I mean I think it's definitely something we need to be worried about, particularly in these markets where you have big foreign ownership. So in France, for example, something like 60% of government bonds are owned by foreign investors and they're more price sensitive. And so they're more likely to sell those bonds when prices don't look attractive. In the US, it's a little bit lower. I think it's something like 25%, but it's still very worrying.

And Japanese investors in particular have been quite sticky because bond yields in Japan have been very low. And you'd think that if you had that change from the Japanese pension fund, that's the biggest you'd have other pensions funds follow suit. You'd have other investors follow suit. And so it would be quite a significant flow. And this is always the worry in Japan is that we've had this big overhang where they've owned so much of foreign assets for so long that when the tides do change, it will be a big move.