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

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. Treasuries unless the Bank of Japan clarifies its intended terminal rate and hiking path.