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Japanese Investor Flows‏

ByDanske Markets
Published 07/08/2013, 08:14 AM
Updated 05/14/2017, 06:45 AM

In June, Japanese investors continued their position as extensive net sellers of foreign bonds for the second month running. The weekly data has so far not shown any sign of the sell-off in foreign bonds easing through June. In Q1 13, the sell-off appears to have been driven by the need to adjust the share of foreign securities in portfolios in the wake of the markedly weaker JPY. In Q2 13, the sell-off to a larger degree appears to have been driven by concerns about Fed tapering and its impact on global bond yields.

The detailed data - so far only released for May - showed that the sell-off of U.S. bonds by Japanese investors accelerated in May, and were the largest monthly sales recorded since data collection started in 2005. Japanese investors still appear to be net buyers of euro area bonds, although purchases have been scaled down since late 2012. The overall picture is that France and the Netherlands are the preferred countries, and that Japanese investors have so far not returned to the PIIGS countries. In Scandinavia, Japanese investors remain substantial net sellers of Norwegian bonds.

Japanese investors are still expected to return to being net buyers of foreign bonds later this year, although some stabilization in bond yields might be necessary before they get the courage to return. In addition, a review of investment rules for public pension funds in Japan is expected to be concluded later this year and will most likely open up for public pension funds increasing their investment in foreign securities.

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