Fitch Ratings said in a report on Wednesday that rising yields on Japanese treasury bonds may prompt domestic institutional investors to keep more money at home. The rating agency said it is expected that the Bank of Japan's policy interest rate will rise faster than market expectations in 2026 and 2027, which will support the yen exchange rate and increase the relative attractiveness of Japanese domestic bonds. “As Japan's inflation, monetary policy, and economic growth prospects drive up domestic real interest rates, higher local yields will reduce the willingness of domestic institutions to pursue lower-yielding overseas assets,” a team of Fitch analysts led by Monsur Hussain, head of market research, said in the report.

Fitch Ratings said in a report on Wednesday that rising yields on Japanese treasury bonds may prompt domestic institutional investors to keep more money at home. The rating agency said it is expected that the Bank of Japan's policy interest rate will rise faster than market expectations in 2026 and 2027, which will support the yen exchange rate and increase the relative attractiveness of Japanese domestic bonds. “As Japan's inflation, monetary policy, and economic growth prospects drive up domestic real interest rates, higher local yields will reduce the willingness of domestic institutions to pursue lower-yielding overseas assets,” a team of Fitch analysts led by Monsur Hussain, head of market research, said in the report.