Foreign Investors Maintain Sell-Off of Japanese Equities Amidst Record-Setting Rally

Foreign investors continued to sell Japanese equities for the second straight week through September 20, indicating a strategic profit-taking amid a record-setting rally. With the market poised for an 11th consecutive year of net outflows by the end of September, overseas sell-offs reached a net 1.75 trillion yen, a recent data release from Japan's Ministry of Finance revealed on Friday.

Since 2015, foreigners have consistently reduced their Japanese stock holdings in September, with the most substantial withdrawal of 5.48 trillion yen occurring in 2023. The net foreign outflow this month has already reached approximately 3.67 trillion yen. This pattern reflects common practices such as quarter-end rebalancing, risk aversion, and strategic profit-taking after significant gains.

The Nikkei 225 momentarily peaked at a record high of 45,852.75 last Friday. This came after the Bank of Japan opted to leave interest rates untouched in a closely divided decision, alongside announcing intentions to gradually reduce its holdings in exchange-traded funds and real estate investment trusts. Meanwhile, foreign interest in long-term Japanese bonds has waned, with purchases dropping sharply to just 53.3 billion yen from the previous week's 1.19 trillion yen. In contrast, short-term bills garnered substantial foreign interest, attracting inflows of 990.4 billion yen.