Investor Hesitation: The U.S. Central Bank Tensions Ripple Through Japan's Markets
Foreign investors sold Japanese stocks for the second consecutive week, influenced by U.S. President Trump's attempts to remove a Federal Reserve Governor, raising concerns about the Fed's independence. Despite a sell-off, Japanese indices registered gains. Simultaneously, foreign investors favored Japanese bonds and bills, while Japanese investors turned to foreign assets.
Foreign investors have continued to divest from Japanese stocks, marking the second week of such activity as of August 30. This pattern follows U.S. President Donald Trump's controversial efforts to oust a Federal Reserve Governor, sparking apprehensions over the central bank's independence and its future policy direction.
President Trump's frequent criticisms aimed at Federal Reserve officials, pressing them to lower interest rates, culminated in an attempt to remove Fed Governor Lisa Cook. These actions have amplified concerns regarding the Federal Reserve's autonomy, while also affecting growth stocks amid rising bond yields.
Despite the prevailing caution, Japan's stock indices demonstrated resilience with the Nikkei and Topix recording significant monthly gains. Meanwhile, foreign investments flowed into Japanese bonds and bills, while Japanese investors showed increased interest in foreign market assets.
(With inputs from agencies.)
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