Japanese Investors Extend Foreign Bond Sell-Off to Five-Week Streak
Japanese investors have offloaded foreign bonds for five consecutive weeks, the longest streak in four years, as rising domestic yields drive capital home.
POLICY WIRE — Tokyo, Japan — Japanese investors have offloaded foreign bonds for a fifth consecutive week, marking the longest period of sustained selling in four years. This trend signals a notable shift in investment strategy as capital begins to flow back toward domestic markets.
The primary driver behind this retreat is the rising yield environment within Japan. The benchmark 10-year Japanese government bond yield has climbed by more than 80 basis points throughout the year, making domestic debt increasingly attractive compared to overseas alternatives.
Data through October 10 showed that year-to-date net outflows from foreign bonds reached 5.34 trillion yen, representing the highest level of net sales since 2022. While the pace of these sales has shown signs of slowing, the consistent withdrawal highlights a broader move toward repatriation.
Market activity has been volatile, with foreign investors also recording their largest weekly outflow from Japanese bonds in six months during the week ending September 26. That period saw 4.61 trillion yen in sales, fueled by a global bond-market selloff and anticipation regarding further interest rate hikes from the Bank of Japan.
Despite the aggressive shift in bond allocations, the behavior of major institutional players remains nuanced. Limited selling by life insurers suggests that the process of bringing capital back to Japan is occurring at a gradual pace.
Reporting by Policy-Wire (PW)
