Japanese investors sharply increased their overseas stock purchases in April, shifting focus from bonds to rebalance their portfolios. The move was influenced by global market disruptions, partly caused by Japan’s tariffs, which created opportunities for buying international stocks at discounted prices.
According to data from Japan’s Ministry of Finance, investors bought a net total of 3.27 trillion yen (approximately $22.37 billion) in overseas stocks in April. This marks the highest monthly total for foreign stock purchases since at least 2005. In contrast, they pulled 1.08 trillion yen from foreign bonds during the same period.
Institutional Investors and Trust Accounts Lead the Way
Institutional investors played a significant role in these overseas stock purchases, pulling 1.99 trillion yen from long-term debt securities but allocating 906.3 billion yen to short-term instruments. Trust accounts made the largest contribution, buying a record 2.76 trillion yen in foreign stocks. Investment trusts followed closely, adding 801.4 billion yen in international equities.
Despite the overall positive trend in overseas stock buying, life insurance companies took a different approach. They sold 462 billion yen worth of foreign stocks, marking the fourth consecutive month of net selling.
Market Reaction to Global Events and U.S. Treasury Yields
In early April, U.S. Treasury yields saw an increase, as bond markets faced a sell-off. Hedge funds unwound leveraged trades, and foreign investors reduced their U.S. bond holdings in what appeared to be a reaction to Japan’s tariffs. This movement raised doubts about the safe-haven status of U.S. assets, influencing global market trends.
Large Investments in U.S. Stocks Continue
In a related development, Bank of Japan data revealed that Japanese investors invested 2.12 trillion yen in U.S. stocks in March, marking the largest monthly outlay in U.S. equities since 2014. However, they slightly reduced their exposure to European stocks, with a decrease of 21.82 billion yen.
Foreign Investment in Japan Grows
Meanwhile, foreign investors showed strong interest in Japanese markets in April, with inflows reaching 3.68 trillion yen. This marks the largest monthly inflow into Japan’s markets in two years.
Analysts suggest that these early April purchases may have been driven by optimism surrounding Japanese companies. Corporate reforms, growing confidence in the stability of the yen, and attractive stock valuations relative to Western markets likely contributed to the increased investments.
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