Japanese capital has begun returning home, but uncertainty over where bond yields will peak and how far the Bank of Japan must raise interest rates is delaying a much larger repatriation of overseas assets. The Bank of Japan has likely done enough for now to deter another wave of speculative bets against the yen, following last week’s rate hike, pledges to address inflation and a reported rate check in the foreign-exchange market. However, two dovish dissenting votes at the meeting and another bond selloff this week have left major investors reluctant to commit heavily to domestic bonds while yields continue rising. The yen traded near 159 per dollar on Friday, close to the 157 level that represented the median six-month forecast in a Reuters poll earlier this month. Speculative yen positioning shifted from a deep net short to the largest net long since July 2025, valued at $9.7 billion, during the first two weeks of September. Benchmark 10-year JGB (Japanese government bond) yields have risen two percentage points in less than two years to above 3%, a 30-year high. Japanese investors bought 4.8 trillion yen of sovereign debt last month, while HSBC estimates Japanese banks have sold about $70 billion of foreign bonds this year. Analysts say a broader repatriation could accelerate in 2027 or sooner if investors gain confidence that Japanese yields have peaked, particularly if the $1.8 trillion Government Pension Investment Fund increases its domestic allocations. Still, rising U.S. yields and expectations of further Federal Reserve tightening could limit the Bank of Japan’s ability to sustain a yen rally.