Foreign Investors Splurge on Japanese Bonds as BOJ ends Negative Rates

Photo:Freepik

Foreign investors significantly increased their purchases of Japanese bonds last week, acquiring a massive 1.15 trillion yen (about $7.8 billion) of long-term Japanese bonds on a net basis. This marks the largest weekly net purchase since early April 2023, according to data from the Ministry of Finance. Additionally, Japanese short-term debt securities drew a net 2.22 trillion yen in overseas capital last week after about 2.75 trillion yen of net purchases in the prior week.

The Bank of Japan is expected to debate ending its negative interest rate policy next week, depending on the outcome of Friday's preliminary survey on big firms' wage talks. This potential shift marks a significant departure from its decade-long stimulus programme. Yields on one-year Japanese treasury bills have risen by 8 basis points in 2024 to nearly a decade high of 0.067 per cent, while six-month yields, negative for eight years, rose above zero last week.

In the equity market, overseas investors were net buyers of Japanese equities for a second consecutive week, securing 198.35 billion yen in stocks despite shares pulling back from record highs. The Nikkei share average shed about 0.56 per cent last week, ending its five-week-long winning streak. Foreign investors bought cash equities and derivative contracts of about 176.39 billion yen and 21.96 billion yen, respectively, on a net basis last week.

On the other hand, Japanese investors secured about 1.58 trillion yen of long-term foreign bonds, recording the largest weekly net purchase since Jan. 12. They also invested approximately 6.6 billion yen into short-term debt instruments. Conversely, domestic investors pulled roughly 616.5 billion yen out of foreign equities as they extended net selling into a second consecutive week.