Japanese Investors Shift Strategies Amid Rising Treasury Yields

Japanese investors offloaded significant amounts of foreign debt and equities due to rising U.S. Treasury yields and elevated stock valuations. Despite this, they invested heavily in foreign bonds and equities in 2025, reversing previous trends. The Bank of Japan reported notable shifts in investments across global bonds.

In December, Japanese investors reduced their holdings in foreign debt, reacting to rising U.S. Treasury yields and taking profits from high stock valuations. Japan's Ministry of Finance data indicated a net sale of 374.2 billion yen in long-term bonds and a divestment of 350.4 billion yen in foreign stocks.

Despite last month's net selling, Japanese investors significantly increased their investments in foreign bonds to 13.59 trillion yen in 2025, a substantial rise from 4.16 trillion yen in 2024. They also turned towards foreign equities, adding 1.71 trillion yen, reversing two years of continual net sales.

The Bank of Japan reported that Japanese investors sold 342.67 billion yen worth of British bonds in November, reacting to fiscal concerns, while directing substantial funds amounting to 10.6 trillion yen into U.S. bonds and 2.74 trillion yen into European debt securities during the year.

(With inputs from agencies.)