Why Japanese Investors Are Dumping U.S. Treasuries

Japanese investors have been shifting from US Treasurys to other US assets due to high currency hedging costs, which reduce the attractiveness of Treasurys. Despite this, they are investing heavily in US corporate bonds, stocks, and agency debt. This shift reflects a broader trend of investors moving up the risk spectrum due to low returns on safe assets. The types of investors involved range from the Bank of Japan to insurers and pension funds. The future of this trend depends on US Treasury yields and hedging costs.

Why have Japanese investors been moving away from US Treasurys?

• To avoid US economic instability

• To invest in European markets

• Because of low yields on Treasurys

• Due to high currency hedging costs

What types of US assets are Japanese investors increasingly investing in?

• US real estate

• US corporate bonds, stocks, and agency debt

• US small businesses

• US technology startups

What is the main reason for the shift in Japanese investment strategy?

• Desire for more stable investments

• Need to seek higher returns due to prohibitive hedging costs

• Government regulations

• Preference for European assets

How have Japanese investors' risk profiles changed?

• They have become more risk-averse

• They have maintained the same risk level

• They have increased their risk profile

• They have eliminated all risk

What is a potential factor that could change the current investment trend?

• Introduction of new Japanese government bonds

• Decrease in US Treasury yields

• Increase in US Treasury yields

• Stability in currency exchange rates