The Bank of Japan raised its policy rate to 1.25% and signaled further
tightening. Japanese investors hold about $2.5 trillion in U.S. equities, bonds
and other financial assets—roughly half of a $5 trillion overseas portfolio.
Higher domestic rates could draw capital back to Japan, potentially slowing or
reversing cash flows that have supported U.S. and global markets. Some analysts
say a modest rise may not prompt large repatriation because investors can still
buy U.S. tech or higher-yielding foreign bonds; yields abroad remain above
Japan. Norihiro Yamaguchi, chief Japan economist at Oxford Economics in Tokyo,
said he does not expect large-scale repatriation of U.S. Treasures unless the
Bank of Japan clarifies its intended terminal rate and hiking path.
