Record Foreign Inflows in Japanese Bonds Amid Eased Yields

Foreign investors made the largest purchase of Japanese bonds in eight weeks, totaling 1.74 trillion yen. This surge followed a drop in yields from multi-decade highs. Meanwhile, foreign investors ended an eight-week streak of buying Japanese stocks with a net sale of 491.2 billion yen.

Japanese bonds saw their most significant influx of foreign capital in eight weeks ending May 30, as yields dropped from recently seen record highs due to optimistic sentiments over the Middle East conflict resolution. Foreign investors poured 1.74 trillion yen ($10.88 billion) into these bonds, marking the largest weekly net acquisition since purchasing 1.99 trillion yen in early April, according to the Ministry of Finance.

The 10-year Japanese Government Bond (JGB) yield fell 15 basis points from a 29-year peak of 2.8% reached just a week prior, settling at 2.645%. Positive developments included an agreement between the U.S. and Iran to extend a ceasefire and diplomatic moves towards resolving Israeli-Lebanon hostilities, contributing to mitigating tensions. While foreign investors pulled back from Japanese stocks with net sales of 491.2 billion yen, Japanese investors themselves divested 1.07 trillion yen of foreign equities.

Additionally, Japanese investors made their first net withdrawal from foreign long-term bonds in five weeks, totaling 184.8 billion yen. As the yen trades at 159.9300 per dollar, economic interactions remain fluid amid geopolitical shifts.