"Bank of Japan's Dovish Stance on Yen and Uncertainties Sparks Repatriation Concerns"

Bob Michele, global head of fixed income at JP Morgan Asset Management, warns that if the Japanese yen weakens beyond 150 to the dollar, the Bank of Japan (BOJ) may be forced to hike rates sooner than expected. This could lead to a return of Japanese capital to domestic bond markets, triggering market volatility. Michele expresses concern about a potential decade-long repatriation of funds. The BOJ's accommodative monetary policy has concentrated carry trades in the yen, but a weaker yen could import more inflation than desired. The BOJ has loosened its yield curve control policy, and expectations of a quicker exit from ultra-loose monetary policy have increased. Japanese investors have started unwinding positions in foreign markets as yields on 10-year Japanese government bonds reach a decade high.