Japan's Bond Investors Like to Buy Foreign

Last year the Turkish central bank successfully tamped down rising inflation by boosting interest rates and letting the lira appreciate 6 percent against the dollar. The government of Brazil in contrast worked to slow the foreign money lured to the country by the stronger real and the high yield on government debt. The real’s value dropped 11 percent and the inflow of foreign money eased.

Closely watching these developments were investors half a world away: Japanese bond buyers in the uridashi market. Uridashi bonds are sold to Japanese investors in the national currency of the issuer. That market totaled $19.5 billion in 2012, compared with $21.8 billion a year earlier, according to data compiled by Bloomberg. Trades that involve borrowing in Japan, with its low interest rates, and then investing the proceeds in economies with higher interest rates have long been popular. Japanese 10-year government bonds yield only 0.81 percent, the second-lowest in the world after Switzerland. A Japanese investor using this strategy is sometimes called a “Mrs. Watanabe,” a reference to the housewives who control family budgets and play a part in the uridashi market.