Negative interest rates push Japanese banks to riskier assets

Following on from our note last week warning that the Bank of Japan's decision to cut interest rates has led to cash hoarding, reports reveal that Japan's regional banks are moving their investments towards riskier assets abroad or outside of fixed income as yields below zero erode the appeal of Japanese government bonds. The most popular of these are foreign bonds and alternative investments that generally include assets such as real estate and infrastructure. 

We've sort of fizzled out ahead of the FOMC, though I do expect a bit more activity in Europe/UK in the lead up

Here's a piece worth a read from Bloomberg on the shift away from JGBs into riskeir assets

It was out overnight, but ICYMI:

Ten of 11 banks surveyed by Bloomberg this month said portfolio rebalancing is necessary under the Bank of Japan's negative-rate policy

8 saying they've already begun or are considering asset reallocation

Foreign bonds and alternative investments ... were identified as the most popular products by eight of the banks

Two said they favor Japanese and foreign stocks. One declined to comment

"JGBs are losing appeal as an investment asset," said Yoshihiro Yamanaka, an executive officer at Bank of Kyoto Ltd., one of the lenders surveyed. "We have to turn to foreign bonds, such as U.S. and European notes, or alternative products, to meet business expectations for securing profits."