Foreign Investors Flee Japan's Long-term Debt Amid BOJ Rate Hike Anticipation

Foreign investors offloaded Japanese long-term debts before an expected BOJ interest rate hike. 442.6 billion yen exited long-term bonds, contrasting with past max purchases. Despite extensive buys in short-term bills, the Nikkei dropped 0.6% and Japanese investors increased foreign bond holdings.

Foreign investors sold off Japanese long-term debt securities in anticipation of a Bank of Japan interest rate hike expected on December 19. Data from Japan's Ministry of Finance showed an exit of 442.6 billion yen ($2.84 billion) from long-term bonds following a substantial net purchase the prior week.

While long-term bonds saw outflows, Japanese short-term bills witnessed a positive shift with 965.3 billion yen in net purchases, marking two consecutive weeks of inflows. Policymakers hinted at a potential rate rise to 0.75% to combat inflation, impacting market dynamics.

The benchmark 10-year yield peaked at 1.97%, its highest since June 2007, with cross-border local stock purchases slowing significantly. This development dipped the Nikkei by 0.6%, partially due to losses at SoftBank Group despite a Federal Reserve rate cut. Concurrently, Japanese investors ramped up acquisitions of foreign long-term bonds and short-term bills.