Japanese bonds draw strong foreign inflows before fiscal jitters hit markets

Foreign inflows into Japanese bonds surged in the week to November 15, as yields stabilised and investors moved to lock in higher returns, before sentiment soured on renewed concerns over the government’s stimulus plan and its impact on bond issuance. Foreigners bought Japanese long-term bonds for a third straight week, to the tune of 961.6 billion yen ($6.11 billion), registering their largest weekly net purchase since October 4, data from Japan's Ministry of Finance showed on Thursday.

Foreign inflows into Japanese bonds surged in the week to November 15, as yields stabilised and investors moved to lock in higher returns, before sentiment soured on renewed concerns over the government's stimulus plan and its impact on bond issuance.

Foreigners bought Japanese long-term bonds for a third straight week, to the tune of 961.6 billion yen ($6.11 billion), registering their largest weekly net purchase since October 4, data from Japan's Ministry of Finance showed on Thursday. They sold 431.1 billion yen worth of short-term bills.

The benchmark 10-year government bond yield surged to nearly a 17-1/2-year high of 1.8% on Thursday as a ruling-party panel proposed supplementary budget of more than 25 trillion yen to support Prime Minister Sanae Takaichi's stimulus plan. Japanese stocks, meanwhile, attracted 1.02 trillion yen worth of foreign inflows, the most since October 25 as foreigners scooped up beaten down technology stocks following a recent selloff.

The Nikkei 225 index gained as much as 4.2% on Thursday as Nvidia's robust earnings guidance on Wednesday, eased market worries over lofty valuations in the technology sector. Meanwhile, Japanese investors snapped up a net 183.3 billion yen worth of foreign stocks last week, ending a four-week run of net selling.

They also invested a net 348.4 billion yen in foreign long-term debt instruments and 78.9 billion in short-term bills in a second successive week of net purchases. ($1 = 157.3700 yen)

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