Japan To Buy Asian Bonds?
Local media reports indicate that Japan may diversify some of its FX reserves into the bond markets of South East Asia. The announcement could come as early as Friday May 3rd ¹. Admittedly, the scope for flows into EM currencies is significant. Japan has a total FX reserve pool of US$1.24 trn and, as Chart 1 shows, only a tiny fraction of this is currently invested in currencies outside the IMF’s SDR basket (USD, EUR, GBP, JPY, CHF). There is also a strong tendency to hold reserves in the form of bonds rather than cash deposits, which appears to bode well for EM bond markets in particular.
Click here to read the full report: UBS