Foreign Investors Flee Japanese Bonds Amid Fiscal Concerns

Foreign investors have continued to divest Japanese government bonds, with 1.7 trillion yen sold in the week ending May 17, reflecting deepening concerns over fiscal stability and decreasing demand for long-term debt.

The sustained pressure on government bonds is fueled by fears of worsening public finances, potential fiscal stimulus ahead of July's elections, and high inflation. As expectations of rate hikes from the Bank of Japan wane, investors are offloading long-term bonds.

Conversely, investments in Japanese equities have risen, buoyed by corporate earnings optimism after robust March-quarter results. Japanese investors are also shifting to overseas debt, marking a strategic pivot in their foreign asset allocation.

(With inputs from agencies.)