Foreigners Flee Japanese Stocks Amid Political Uncertainty

Foreigners withdrew significant investments from Japanese stocks amid political uncertainty following Prime Minister Shigeru Ishiba's resignation. This caution coincides with speculations about future fiscal policies and potential elections. Meanwhile, Japanese investors continued purchasing foreign stocks and bonds, indicating differing investment strategies.

Foreign investors withdrew a substantial amount of capital from Japanese stocks the week of September 13th, amid concerns over political instability following the resignation of Prime Minister Shigeru Ishiba. According to data from Japan's Ministry of Finance, a net total of 2.03 trillion yen ($13.76 billion) worth of stocks was offloaded, marking the largest weekly withdrawal since September 2024.

Investors remained cautious due to uncertainties concerning the leadership of Ishiba's Liberal Democratic Party. Speculation swirled over whether the new party head would seek a coalition leadership or opt for a snap election. Despite these political tensions, Japanese stocks saw gains as markets anticipated potential increases in government spending under a new leader.

Japanese long-term bonds, on the other hand, witnessed notable foreign inflows, amounting to 1.19 trillion yen, the highest since mid-April. Conversely, Japanese investors continued to purchase foreign stocks and bonds, accumulating 29.7 billion yen in stocks and 1.48 trillion yen in bonds for the third consecutive week.