Japanese investors exit foreign assets for third straight month in Dec

Japanese investors net sold foreign stocks and bonds for a third straight month in December, wary of rising US bond yields, while some also booked profits amid sharp fluctuations in the yen.

The investors sold overseas equities worth a net ¥310.7 billion (US$1.97 billion) following net disposals of ¥1.22 trillion, a month ago, according to data from Japan’s Ministry of Finance. They also ditched ¥1.22 trillion worth of bonds, the most since October, 2024.

Japanese trust accounts continued their trend, offloading a net ¥1.52 trillion worth of foreign stocks, marking their fourth consecutive month of net sales. Conversely, investment trust management companies and life insurers acquired 909.9 billion yen and 137.5 billion yen worth of shares, respectively.

In 2024, Japanese investors were net sellers of foreign equities, offloading about ¥3.48 trillion, with the bulk of sales – stocks worth ¥3.9 trillion – in the last quarter. Conversely, they purchased overseas bonds worth ¥4.16 trillion throughout the year.

Towards the year-end, investors scaled back their expectations for the Federal Reserve’s interest rate cuts, influenced by the potential for increased inflation due to the tariff, migration, and tax policies of the incoming US President-elect Donald Trump’s administration.

Last week, minutes from the Fed’s Dec 17-18 meeting highlighted officials’ increasing concerns about persistent price pressures and the potential effects of policies from the Trump administration.

This week, the US dollar index reached a more than two-year high, and the benchmark 10-year yield climbed to 4.805 per cent, its highest since November 2023, amid shifting expectations for Fed’s rate cuts.

The Bank of Japan’s data showed local investors sold a net US equities worth ¥1.87 trillion in the year to November. They also divested ¥471 billion worth of European stocks and British stocks worth ¥220 billion during the same period.