Australia's second-largest pension fund has built its largest yen overweight in
years, betting markets understate the odds of Bank of Japan tightening, senior
portfolio manager Jimmy Louca said. The fund, which manages about A$370 billion
(US$265 billion) in retirement savings, added the position over the past six
months as USD/JPY slid toward 160. The long-yen stance is uncommon amid broad
yen selling. Louca said the market has only partially judged the sell-off—the
energy-driven drag is largely priced in—but the probability of BOJ rate hikes
appears underestimated. He said the BOJ could hike as soon as next month and
signal two further increases; if it follows through, Japanese government bond
yields could rise further.
