Japanese investors significantly increased their investments in foreign stocks during April, moving away from bonds amid major shifts in their investment strategies. According to data released today, Monday, by the Japanese Ministry of Finance, Japanese investors recorded a net purchase of foreign stocks amounting to 3.27 trillion yen (approximately 22.37 billion USD), the highest monthly level since at least 2005. In contrast, they withdrew 1.08 trillion yen from foreign bonds, reflecting a clear shift in their investment preferences towards higher-yielding assets.
It is worth noting that this increase in foreign stock investments comes after a rise in U.S. Treasury yields in early April, prompting hedge funds to unwind their leveraged positions, leading to a wave of selling in U.S. bonds. Economic tensions stemming from U.S. tariffs also influenced the decisions of Japanese investors, as they sought more stable alternatives with higher returns.
Trust accounts were at the forefront of this shift, recording a record purchase of 2.76 trillion yen in foreign stocks, followed by investment firms adding 801.4 billion yen. Despite this momentum, life insurance companies continued to sell their foreign stocks for the fourth consecutive month, with net sales amounting to 462 billion yen, reflecting different strategies among types of investors.
In a related context, data from the Bank of Japan showed that Japanese investors poured 2.12 trillion yen into U.S. stocks during March, the highest level since at least 2014, while they reduced their investments in European stocks by only 21.82 billion yen, reflecting an increasing preference for U.S. stocks in light of strong performance from American companies compared to their European counterparts.
Moreover, Japanese markets experienced significant inflows from foreign investors in April, with their net purchases reaching 3.68 trillion yen, the largest monthly inflow in two years, reflecting growing confidence in the stability of the Japanese economy and improved valuations of local companies.
