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Today, we launch a new series, Rethinking Asia, as we consider noteworthy and unusual trends in Asian finance and economics. In our first episode, we sat down with Jesper Koll, head of Japan at WisdomTree, a global asset manager. In our conversation, Jesper explains in depth the history and forces behind Japan\\u2019s distinction as a safe haven for global investors. He explains why assets like the yen and Japanese government bonds rally during periods of regional or global turmoil.

Some of the key takeaways from our conversation with Koll include:

• The Japanese yen has been known for some time as a safe haven currency; when global investors are in risk-off mode, the yen strengthens.
• There are a few forces behind the safe haven status: as one of the predominant funding currencies of global financial markets, investors borrow in yen to invest in higher yielding assets during periods of calm. However, during periods of volatility, investors unwind those positions to close (pay back) open yen positions, causing the yen to appreciate.
• In addition, there is the market perception that Japanese asset managers (such as pension funds and insurance companies) repatriate their portfolios back to Japan during crises causing yen appreciation. However, this has been proven to be more myth than reality.
• The yen\\u2019s liquidity \\u2013it is one of the few deep, liquid, freely traded currencies in the Asian time zone\\u2014makes it a candidate for funding positions and also exacerbates reactions during periods of risk-off sentiment.
• Given the increasing importance of China to the global economy and continued restrictions on that country\\u2019s capital account, Japan is experiencing more volatility when investors react to events in China.
• The Swiss franc behaves much like the Japanese yen. Like the yen, the franc is a funding currency for international speculators. It acts like a safe haven asset, and appreciates during bouts of market volatility.

The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.