Foreign Investment Shifts Amid BOJ Policies

Foreign investors have shown restraint in committing capital to Japanese long-term bonds, pulling out 184.6 billion yen in the second consecutive week through July 26. This caution is tied to the Bank of Japan's pending monetary policy decisions, which are anticipated to signal potential interest rate hikes.

On Thursday, the Bank of Japan kept interest rates unchanged but upped its inflation forecasts, indicating a more balanced risk outlook. Despite foreign investor withdrawals from bonds, a total of 10.89 trillion yen has been invested into Japanese bonds this year, reflecting a substantial increase compared to the same timeframe last year.

Meanwhile, foreign investments in Japanese stocks reached a significant peak, with net inflows of 743.3 billion yen—the highest since early May—bolstered by positive sentiments towards a possible trade deal with the United States. In contrast, Japanese investors increased their overseas stock purchases while reducing investments in foreign long-term bonds.

(With inputs from agencies.)