Foreign Investors Exit Japan Amid Fears of Rate Hikes
Foreign investors withdrew a significant sum from Japanese government bonds (JGBs) and stocks as rate hike speculations grow. The sell-off hit records, with notable outflows of long-term bonds and stocks. Meanwhile, Japanese investors also reduced their foreign bond holdings amid economic uncertainties.
In a significant move, foreign investors have pulled out from Japanese government bonds, marking the largest sell-off witnessed in a year. This retreat was influenced by increasing expectations of potential rate hikes by the Bank of Japan, as overseas participants divested 2 trillion yen ($13.60 billion) in long-term bonds, setting a new weekly record.
The yield on 10-year Japanese government bonds soared to a 17-year peak at 1.665% last week, mainly due to speculation of a rate increase scheduled possibly for October 30. Tensions heightened after a division among BOJ board members in their September meeting. BOJ's Asahi Noguchi indicated that the urgency for a rate hike is now greater than before.
Furthermore, overseas investors sold Japanese stocks for a third consecutive week, amounting to 963.3 billion yen. The cumulative outflows for September sum up to 4.63 trillion yen, the third-largest for this month over the past eleven years. Simultaneously, Japanese investors ceased their foreign bond investments streak, withdrawing approximately 162 billion yen from long-term securities.
(With inputs from agencies.)
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