Japan’s Yen and Government Bonds May Get Short-Term Support From Katayama’s Remarks

Morgan Stanley MUFG Securities strategists said remarks made last Friday by Japan’s Finance Minister Satsuki Katayama could support sentiment toward the yen and Japanese government bonds in the short term. According to Jin10, the strategists wrote in a research note that the comments amounted to verbal intervention aimed at countering yen weakness and volatility in ultra-long Japanese government bonds.

They estimated that for every 1 percentage point increase in the Government Pension Investment Fund’s (GPIF) allocation to domestic bonds, it would mechanically generate about 660 billion yen of buying in 7- to 11-year Japanese government bonds and about 800 billion yen of buying in Japanese government bonds with maturities longer than 11 years.

The strategists said the estimate was based on GPIF market value weights calculated at the security level as of the end of March 2026. They added that the risk from such mechanical flows should not be ignored.