MUFG: The JPY - FJElite

While government bond yields have risen in response to higher energy prices, it has been notable that JGB yields have fallen again overnight. The 10-year and 30-year JGB yields have dropped by 7bps and 16bps respectively. JGBs are deriving more support from verbal intervention from Japanese policymakers indicating that they will encourage domestic investors to increase portfolio allocations to domestic assets. Finance Minister Katayama spoke again overnight repeating the message from late last week that ‘if we successfully advance our growth strategy, yen-denominated assets will become more attractive'. When asked about changing the GPIF’s target asset allocation, she told reporters “since that’s the policy this administration is pursuing, it’s possible the portfolio could be reviewed and, if necessary, revised, as the chief cabinet secretary said'. Her comments were also backed up this time by comments overnight from Health Minister Kenichiro Ueno who stated that the GPIF’s portfolio will be reviewed if necessary. The health and welfare ministry oversees the GPIF adding more weight to his comments.

At the same time. Finance Minister Katayama highlighted that within the LPD and beyond, there have been various opinions, such as making JGBs eligible for a system like the Nippon Individual Savings Account (NISA) program that carries tax benefits for retail investors. Another idea was to exclude JGB holdings from inheritance tax rules. She stated that "while I have received petitions regarding these matters and cannot yet make a decision, I feel that the time has come to move forward with these initiatives”. According to Bloomberg, retail savings in NISA accounts have more than tripled since the end of 2020 to JPY71 trillion at the of 2025. Taken together the comments from overnight will further encourage speculation that’s Japan’ huge savings could be better utilized to provide more support for JGBs and the yen.