FT on Japanese Money Funds
The Financial Times writes "Survival of Japanese money market funds in doubt." The article says, "Japan's money market fund industry faces an unprecedented crisis that threatens its survival, according to Moody's, the rating agency. Following the Bank of Japan's decision to introduce negative interest rates in January, it is feared that asset managers can no longer guarantee [sic] Japanese investors will get back the savings invested in money market funds. Yields have turned negative on many of the short-term assets held by these funds, forcing Japanese investment companies to stop taking new money from investors. Nomura, Nikko and Daiwa are among those that have turned clients away. "The ultimate survival of the Japanese money market fund industry is in jeopardy," says Vanessa Robert, senior credit officer at Moody's.... Japanese asset managers have appealed to the central bank for a special exemption from negative rates in order to overcome their problems. In the meantime, Ms Robert says, these fund companies will "quickly run out of viable options" to ensure that investors' capital remains secure. Around Y2tn ($17bn) is held in money market funds in Japan and a further $100bn is in similar money reserve funds, which can invest in higher-yielding foreign-currency securities." The FT adds, "Some are more optimistic about the fate of Japan's money funds. Jason Granet, head of international cash portfolio management at Goldman Sachs, the US bank, says: "Negative rates will not spell the end for Japanese money funds. But investors will recalibrate their expectations for returns on cash." Mr Granet points out that the Dublin-domiciled yen money market fund run by Goldman Sachs has operated with negative rates for more than a year and has continued to attract positive inflows from investors. He adds that Goldman has not weakened credit standards or attempted to hold riskier assets to boost the returns of its money funds. "Our focus remains on liquidity and the preservation of capital. Safety still rules at the end of the day," says Mr Granet."
