Japanese Investors Shift Gears: A Return to Overseas Bonds

Japanese investors returned to overseas bond purchasing the week of April 19, breaking a six-week selling spree. Amid concerns about U.S. trade tariffs and the bond market slump, they acquired a net 223.7 billion yen in foreign bonds. This move follows increased interest in Japanese bonds by overseas investors.

In a noteworthy reversal, Japanese investors emerged as net buyers of overseas bonds during the week ending April 19, marking their first such action since late February. This shift follows a six-week period during which these investors had predominantly offloaded overseas bonds amid broader apprehensions about U.S. economic policy and trade tariffs.

Data from Japan's Ministry of Finance highlights a net purchase of 223.7 billion yen in long-term foreign bonds, equating to approximately $1.57 billion. The renewed interest comes as U.S. Treasury yields surged, prompted by a significant sell-off and hedge funds divesting from leveraged basis trades, while overseas investors appeared to be deterred by escalating trade tensions.

Japanese investors, who are the most significant holders of U.S. Treasuries, holding around $1.13 trillion, have also shown interest in foreign equities. Meanwhile, global investors are channeling funds into Japan, drawn by its perceived stability and the Bank of Japan's potential postponement of interest rate hikes, leading to substantial investments into Japanese bonds and equities.

(With inputs from agencies.)