Posizione leggermente divergente dalle solite rispetto al carry trade e che nella versione attuale condivido. Precedentemente Jen sosteneva l'inesistenza del carry sintetico! Probabilmente MS aveva grosse posizioni sull'argomento!
Quà si sottolinea con il fenomeno carry sia strutturale o almeno ciclico in quanto la fuoriuscita di capitali dal giappone continua incessantemente e in questi ultimi anni ha preso strade anche più "rischiose".
Il motivo di questa inversione di tendenza sugli investimenti data da Jen mi sembra un pò leggerino.
Più probabile un maggior orientamento al rischio permesso da un andamento demografico che concentra le ricchezze nipponiche in sempre meno mani con i figli orami 40/50enni più orientati ad un modello anglosassone di investimento rispetto ai padri.
Currencies
Big Potential for Further Japanese Retail Outflows
April 05, 2007
By Stephen Jen | London
Summary and conclusions
In this note, I highlight a simple point, that Japan’s holdings of risky assets, including foreign assets, as a percentage of its total liquid financial asset holdings, are still very low. This implies that there is great potential for further retail outflows. Whether or not these outflows will persist is a difficult call for me to make now, but investors should be aware that the origin of the pressure expelling capital out of Japan may be quite powerful and structural in nature. Though important in their own right, the ‘JPY carry trades’ are a coincidental story.
In my recent writing, I have highlighted the cyclical vulnerability of the USD, particularly in 2Q. However, the risks to USD/JPY are biased to the upside, as the JPY carry trades and structural capital outflows are likely to keep the JPY weak. I reiterate our call that USD/JPY will reclaim 120 and EUR/JPY will breach 160 in 2Q.
Two schools of thought on why the JPY is weak
There are two broad schools of thoughts on the JPY. Outside Japan, investors and commentators seem to be fixated on the so-called ‘JPY carry trades’. In Japan, the view on the JPY straddles both a structural and a cyclical aspect. The cyclical part is related to the ‘JPY carry’, but the structural part is connected with a fundamental and structural shift in Japan’s ‘home bias’. My view is more in alignment with the mindset in Japan.
Like many in Japan, I believe that the JPY is weak partly, not wholly, because of Japan’s low interest rates. What has been a key development since late 2005 is a gradual decline in Japan’s ‘home bias’ (i.e., its long-standing preference, possibly driven by cultural or risk preferences in the past, for JPY-denominated assets). The positive interest rate carry has encouraged this structural shift, but the structural shift would probably have occurred even if Japan’s interest rates were higher than they are now, I suspect.
This is the ‘capital outflow’ story I’ve tried to emphasize to clients in recent months, to try to draw them away from the simple ‘JPY carry trade’ fad. While ‘JPY carry trades’ have indeed been a powerful force in keeping the JPY under-valued, structural capital outflows are also critically important. Further, I believe that the latter is a bigger story — not only because Japanese flows into foreign equities may have accelerated, but also because a similar trend may be occurring in Korea right now and may occur in China in the coming years.
The BoJ’s Flow of Funds data
The Bank of Japan recently released the 4Q06 Flow of Funds data. In this release, the BoJ documents the stocks of financial asset holdings of different types of investors in Japan. In this note, I am focusing on the Japanese HHs.
I make the following observations:
• Observation 1. Japanese HHs have massive financial holdings: close to US$13 trillion in gross terms and US$10 trillion in net terms. Japanese HHs now hold close to US$13 trillion worth of financial assets, with a net asset position of US$9.6 trillion, which is roughly equivalent to around 220% of GDP. While the economy as a whole, including all seven key sectors, owns nearly US$80 trillion of assets, the Japanese HHs have the largest net asset position of all. Thus, the HH sector is most important for the purpose of thinking about the capacity of capital outflows from a sector that is most likely not bogged down by concerns about asset-liability mismatch.
• Observation 2. Japanese HHs have a cash-rich portfolio. Incredibly, 50.5% of Japanese HHs’ assets are held in currency and deposits; the comparable figure in the US is around 10%. Direct JGB holdings account for 2.1% and equities account for 11.9% of retail investors’ portfolios. Another 25.9% are held in insurance and pension reserves, which, in turn, are mostly invested in bonds and equities. In any case, Japanese HHs’ cash holdings are still meaningfully larger than the total holdings of securities at around 40.0%, excluding investment trust beneficiary certificates. (The comparable figure for the US is 83%, based on the Fed’s Flow of Funds data.) This suggests to me that the current level of risk-tolerance of Japan’s HHs is still extraordinarily low, and has scope to increase in the future.
• Observation 3. Japanese investors’ direct holdings of foreign currency assets are very low. Japanese HHs’ direct holdings of foreign securities account for only 0.5% of their total wealth. Even the economy-wide average of 5.5% is rather low. Adding on top of these figures the foreign currency cash deposits, the Japanese HHs hold less than 1% of their financial wealth directly in foreign assets, and the economy as a whole has only about 6.1% directly held in non-JPY assets.
Financial institutions may have raised their non-JPY asset holdings, on behalf of the Japanese HHs. The BoJ’s Flow of Funds data don’t offer new information on the non-JPY asset holdings by Japanese financial institutions. What is reported is that investment trust funds have grown by around US$300 billion in size (¥33.6 trillion) in the last two years. A good portion of this increase may have come from the foreign currency component, I suspect.
Demographics and risk-taking in Japan
The ‘JPY carry trades’ became especially popular toward the end of 2005, when it, ironically, became clear that the BoJ was preparing the market to terminate QE (quantitative easing) and ZIRP (zero interest rate policy). While ‘JPY carry trades’ are clearly an important factor keeping JPY weak now, it is not clear why they were not a factor prior to 2005, when the JPY’s yield deficits were also quite large against several currencies. I suspect that there have been both cyclical and structural factors that triggered such a shift in risk-taking. One of the possible explanations of a structural shift in risk-taking could be demographics, whereby Japan’s ageing population has finally realized that a relatively straightforward way to help finance their lengthening retirements (as longevity improves and workers retire as scheduled) is to deploy cash to riskier assets.
Bottom line
There is significant potential for Japan’s retail sector to continue to raise its investment in risky assets in general and non-JPY assets in particular. The sector’s cash holdings of 50% and securities holdings of 40% of its total financial wealth are very puzzling (the figures are 10% and 83%, respectively in the US) and could potentially rise sharply. The possibility that the Japanese investor base may be undergoing a structural shift may pose a lingering threat to the JPY. Capital outflows from Japan could continue to over-rule economic fundamentals and keep the JPY under-valued.
- domanda pro nuovo 3d: hai grafi che mostrino la correlazione tra valute carryate e indici azionari/commodities/mercati in genere su cui la liquidità sintetica vada ad essere investita? Sarebbe interessante vedere se dai cambi (trend) si possono individuare gradi di correlazione sufficientemente densi (et affidabili) per potersi tradare altri mercati 
(meglio di cosi non riesco a spiegarmi, dev'essere l'età 
...)
)
