Contrary to some expectations, the yen surged after the earthquake, and suddenly every talking head out there knew about and had something to say on the “yen repatriation trade.” The simple gist: In the crisis, companies and individuals would move their foreign-held assets back into Japan, causing the yen to rally.
Well, there have been some gyrations, and some interventions, but the yen is basically where it was pre-quake.
So what happened? Turned out it was overblown.
Citi’s Steve Englander explains:
We believe repatriation by Japanese investors in the wake of the earthquake will be limited. The first reason is very simple. The share of foreign assets among Japanese household financial assets is still quite low. According to BoJ’s statistics (Figure 1) Japanese households have roughly JPY 14 hundred trillion of financial assets but 55% is held in bank deposits. On the other hand, the risk asset share, for instance equity or investment trusts, is very limited. In terms of foreign asset, the BoJ doesn’t show an exact figure, but it can be estimated to be only around JPY 42 trillion, roughly 3% of the total financial asset. This figure includes foreign currency deposits (JPY 5 trillion), foreign investment trusts (JPY 25 trillion), foreign securities investments including Uridashi bonds and Samurai bonds (JPY 9 trillion) and JPY short positions in FX margin trade (JPY 3 trillion).So our very basic understanding is that Japanese retail investors may not be prone to repatriate foreign assets even though Japan has endured a serious national tragedy. Rather, we believe, they have been and still are in the long term process of diversifying their huge domestic asset base by accumulating foreign assets.
This chart he provides, comparing household assets in Japan to that of the US is fantastic, and what it shows is that basically households have a ton of cash in the US.
(Japan is the bottom of the two bars, and Japanese cash bank deposits are represented by the huge light green part of the bar).
Outside of households, obviously, you have the insurance sector, but actually the insurers aren’t pressed for that much cash either. They’re holding 2.7 trillion yen, notes Englander, vs. about 300 billion they’re likely to be paying out.