Japanese Yen Credit Flees Asian Dollar Bonds Experience a Sharp Drop

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In 2022, the Bloomberg Asian-Pacific Japanese Corporate Index will be down merely 0.6%. That's compared to a 9.4% drop in the Asia investment-grade dollar bond index, which like fixed income assets around the world has fallen amid rising inflation and U.S. interest rates. On Friday, the region's stock and bond markets were hit by a wave of risk aversion.

Because of the BOJ's policies, the yen has fallen in value as other central banks across the world have tightened their policies. The fact that the cost of living in Tokyo grew at its sharpest rate in nearly three decades in April suggests that pricing pressures could be growing in the country famous for its low inflation.

According to Asset Management One Co.'s global fixed income division fund manager Haruyasu Kato, “Japanese investors do get anxious about decreasing risk assets, volatility, and the rapid collapse in the yen.” “However, the BOJ's policy of yield curve control separates movements in Japanese yields from the rest of the world.”