Global fund managers are warming to Japan’s bond market again as signs of recovering domestic demand and a more supportive policy backdrop add to the appeal of elevated yields. Rowe Price Group, which scaled back exposure to Japanese government bonds earlier this year, now favors bonds with longer maturities. Allianz Global Investors is selectively adding intermediate- and long-dated bonds, while BNP Paribas Asset Management has built up its exposure to super-long debt.
The shift marks a reversal from earlier this year, when high yields alone weren’t enough to compensate investors for concerns that the Bank of Japan was raising rates too slowly, fiscal spending would swell debt supply and traditional domestic buyers remained on the sidelines. Expectations for further BOJ rate hikes and signs of returning demand from insurers are now giving fund managers more confidence to take advantage of those yields.
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