Goldman Sachs: Flows In Focus

Goldman Sachs note that Japanese portfolio flow data for November "revealed that trust accounts, a category which likely includes Japan's Government Pension Investment Fund (GPIF), made record purchases of foreign bonds and record sales of foreign equities. As a result, trust accounts drove the country's sales of foreign equities in November and, along with banks, continued to drive strong flows into foreign long-term bonds. If GPIF was indeed involved, we think that these flows probably reflect portfolio rebalancing rather than active investments. More broadly, we see less scope in the year ahead for Yen-negative fixed income outflows and greater potential for Yen-positive equity inflows, which should be supportive of further JPY appreciation even as risky assets and US yields rise. Our measure of weekly FX flows has also shown robust cross-border demand for JPY from mutual funds over the past month... Also, the Suga Administration approve an additional economic stimulus package, but our economists think the resulting boost to growth will be much smaller than the 3.6% of GDP quoted by PM Suga."