Japanese Investors Flock to Foreign Bonds Amid Market Volatility

In November, Japanese investors sought refuge from volatile stock markets by investing heavily in foreign bonds, reversing the trend of significant net sales from the previous month. They bought a net 718.9 billion yen of foreign long-term bonds, signaling a strategic shift towards safer investment options.

In a strategic move, Japanese investors sought safety in foreign bonds during November, following a tumultuous period of net sales the previous month. As stock market volatility drove risk aversion, they purchased a net 718.9 billion yen ($4.60 billion) of foreign long-term bonds, partially reversing the prior month's 1.24 trillion yen net sales, according to data from Japan's Ministry of Finance.

The shift comes as the MSCI World Index experienced a significant decline of up to 4.36% due to concerns over high tech valuations, subsequently recovering slightly by month's end as anticipation grew for a U.S. Federal Reserve interest rate cut. Japanese investments in foreign debt have amounted to approximately 13.77 trillion yen this year.

Elsewhere, Japanese entities made modest investments in foreign stocks with a net of 114.7 billion yen in November, following significant net sales in October. Trust accounts sustained their buying spree in foreign long-term debt, acquiring 435.7 billion yen in November. Conversely, life insurers and investment trust companies reduced their holdings in long-term foreign debt. Notably, large inflows were observed in U.S., French, and German bonds.

(With inputs from agencies.)