Reuters – A potential rise in yen borrowing costs after Japan’s tiny step toward monetary tightening could slow short-term money inflows into commodities, but longer-term investors such as pensionfunds will probably keep on buying.<\/p>\n
The Bank of Japan’s decision on Thursday to scrap its ultra-easy monetary policy isn’t likely to lead to a quick jump in interest rates, but the move has created enough uncertainty that it could limit hedge funds’ buying of such risk assets.<\/p>\n
Global commodities markets plunged earlier in the week as hedge funds with an eye on a possible BOJ shift unwound yen carry trades, in which they borrow in a low-yielding currency like the yen to invest in assets in higher yielding currencies or in commodities.<\/p>\n
Prices rebounded a little by the time of the BOJ news, but they remain low and the new interest rate picture could mean that only longer-term investors will continue to buy such assets.<\/p>\n
“I still believe that the long-term inflow of funds into commodities will continue,” said Akio Shibata, deputy director at Marubeni Research Institute.<\/p>\n