Japanese investors sell foreign bonds for fifth week as domestic yields rise
Japanese investors sold another 161.6 billion yen of foreign long-term bonds in the week through October 17, according to Reuters. The five-week run is the longest in four years.
Japanese investors sold foreign bonds for a fifth consecutive week in the period through October 17, the longest such run in four years, Reuters reported on October 22. The sales have raised the prospect that higher yields on Japanese bonds could draw more investment home, although the latest weekly sale of foreign long-term bonds was the smallest in the streak.
Investors sold a net 161.6 billion yen of foreign long-term bonds and 156.9 billion yen of short-term bills in the latest week, according to Ministry of Finance figures cited by Reuters. Net sales of foreign long-term bonds totaled about 3.43 trillion yen over the five weeks and 5.18 trillion yen so far this year, the largest amount for the comparable period since 2022.
Why Japanese bond yields matter
The benchmark yield on 10-year Japanese government bonds has risen by more than 80 basis points this year, Reuters reported. That makes domestic bonds more attractive to investors comparing returns at home and abroad. Recent buying of bonds as a refuge from market turmoil has pulled the yield back from a three-decade high reached in October.
Reuters said Japanese banks have led this year's foreign bond selling. Life insurers, meanwhile, have indicated plans to maintain or increase purchases of domestic bonds in the second half of the fiscal year. Their investment plans are due to receive attention this week: Japanese life insurers manage about $2.5 trillion in assets, roughly a quarter of them overseas, according to the Life Insurance Association of Japan figures cited by Reuters.
The smaller long-term bond sale came as US Treasury yields eased from recent highs. Reuters said the benchmark 10-year US yield had fallen by roughly 27 basis points from a 24-and-a-half-year high of 5.3645% reached earlier this month, while investors sought the relative safety of bonds amid stock-market worries about artificial intelligence.
Other cross-border investment flows
The bond sales did not extend to every overseas asset. Japanese investors bought a net 128.3 billion yen of foreign shares during the week, their fifth week of net buying in the past six, Reuters reported. Foreign investors, in turn, bought a net 1.45 trillion yen of Japanese long-term bonds for a third consecutive week, while selling 2.24 trillion yen of Japanese short-term bills.
The Ministry of Finance scheduled its release of securities transaction figures for October 11–17 on October 22. Its weekly series is compiled from reports by designated major investors. The flows show purchases and sales in that series; whether they develop into a sustained change in Japanese investors' allocations remains unclear.
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Sources and context
- Japanese investors sell foreign bonds for fifth straight week, eye home marketReuters, republished by Channel News Asia
- International Transactions in Securities (Release Schedule)Japan Ministry of Finance
- International Transactions in SecuritiesJapan Ministry of Finance
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