The Central Bank’s ultra-loose policy has eroded the yen’s status as a traditional safe-haven asset for at least the past two years, but the yen’s reaction to Japan’s New Year’s earthquake suggests that the once-favored safe-haven asset faces even deeper problems. As Japanese firms shift their focus from promoting exports to overseas expansion, FDI accounts for an increasing share of the country’s net international investment. The share of bonds and equities was below this indicator in 2014 and has since declined further. Foreign direct investment (FDI) has grown so fast that it has overshadowed the impact of portfolio flows, limiting the yen’s safe-haven role in the past in the event of a disaster.
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