During a visit in early November, AMRO staff met with market participants in Tokyo to seek their views on recent developments in Japan’s financial markets and risks to the outlook. Market participants remain relatively “comfortable” with the current market situation, albeit are keeping a very close eye on risks going forward. The main focus is on yen weakness, with analysts expecting the Bank of Japan to remain dovish in the foreseeable future. That said, investors are becoming increasingly concerned about the valuation of banks’ securities portfolios, while investment bankers flagged potential risks to the corporate bond market, whose function has been adversely impacted by the distorted Japanese Government Bond yield curve.
Market Insights