Turkey has twin deficits, the fastest inflation in almost five years and is at risk of being dragged into another conflict in the Middle East. But Japan's intrepid retail investors will forgive a lot when it comes to yield.
It's those 10 percent-plus rates across the Turkish bond curve — among the highest in major emerging markets — that are luring the Mr. and Mrs. Watanabes to the country's assets.
Starved for return by near-zero rates at home, individual investors have propelled a 27 percent jump in Japanese mutual funds' investments in Turkish lira-denominated bonds this year. At ¥50.8 billion through August, it's poised to be the biggest annual increase since 2012, according to data from Japan's Investment Trusts Association.