Surge in Bond Sales as Inflation Fears Grip Japan

Foreign investors have significantly increased their sale of Japanese bonds due to inflation concerns caused by rising oil prices and ahead of a policy decision by the Bank of Japan. In contrast, Japanese stocks saw foreign investment inflows as Japanese investors continued to purchase foreign stocks.

Foreign investors have been offloading Japanese bonds substantially as inflationary concerns mount due to escalating oil prices and the impending policy decision by the Bank of Japan. In the week ending April 25, foreign investors sold a net 786.9 billion yen of Japanese long-term bonds, a sharp increase from 294.7 billion yen the previous week, while also reducing short-term bond holdings by 1.12 trillion yen, according to Japan's Ministry of Finance.

The Bank of Japan maintained its interest rates on Tuesday, although three out of nine board members suggested a hike, reflecting concerns about rising inflation driven by higher oil prices. The yield on the 10-year Japanese government bond spiked to a 29-year peak of 2.525% as oil prices reached a four-year high amid unresolved U.S.-Iran peace talks.

Despite the bond selloff, foreign investors showed an appetite for Japanese stocks, acquiring 807.9 billion yen in the fourth consecutive week of purchasing, bringing the total to approximately 10.08 billion yen. Japanese investors, on the other hand, were net buyers of foreign stocks for the 10th week in a row, while selling off 887.7 billion yen in foreign long-term bonds and 263.8 billion yen in short-term securities.