Japan's rising yields stir debate over growing repatriation risk

Japanese government bond (JGB) yields near three-decade highs are giving fresh prominence to a long-discussed risk for global investors: the prospect of the nation's vast pool of overseas capital returning home.

While there's little sign of a rush yet, some money managers say markets are underpricing how quickly that could change as JGBs become increasingly attractive — and how even a modest shift could ripple through the yen and global bond markets.

"If domestic yields continue to rise, Japan may gradually retain more capital at home," said Ales Koutny, head of international rates at Vanguard Asset Management's active funds. "That matters not only for the yen and JGBs, but also for Treasury markets, European bond markets and broader global funding conditions."

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