Japanese investors step up domestic bond purchases as foreign demand drops: JSDA data

Japanese investors have sharply increased their purchases of domestic government bonds in the first five months of the fiscal year, while foreign demand for Japanese government bonds (JGBs) has fallen dramatically, Reuters reported, citing data from the Japan Securities Dealers Association (JSDA).

Domestic investors bought 21.7 trillion yen ($137.17 billion) of coupon-bearing JGBs between April and August, equivalent to 89% of the 24.3 trillion yen purchased during the whole of fiscal 2025, according to the latest JSDA data released on Thursday, Reuters reported.

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Japan's fiscal year runs from April 1 to March 31.

If the current pace continues, domestic purchases are set to surpass the 33.9 trillion yen recorded in fiscal 2024. That would mark the highest level in the JSDA's data set, which dates back to fiscal 2018 following a revision to its reporting format.

Medium-term government bonds have attracted the bulk of domestic demand. Japanese investors purchased 12.7 trillion yen of medium-term JGBs from April through August, already exceeding the 9.1 trillion yen bought during the entire 2025 fiscal year.

Demand for super-long-term bonds has also remained significant, although it is well below previous peaks. Domestic investors purchased 3.6 trillion yen of super-long-term JGBs during the first five months of the current fiscal year, roughly matching their full-year purchases in fiscal 2025. That compares with a peak of 19 trillion yen in fiscal 2021.

The surge in domestic buying contrasts sharply with the behaviour of foreign investors. Overseas investors purchased just 2.8 trillion yen of coupon-bearing JGBs from April through August, compared with 32.8 trillion yen during fiscal 2025, which was their largest annual purchase in the JSDA data.

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Foreign investors have also turned into net sellers of medium-term JGBs. They offloaded 1.9 trillion yen of such securities during the April-August period, compared with net purchases of 17.4 trillion yen in fiscal 2025, Reuters reported.

The shift highlights a significant change in the composition of demand for Japanese government debt, with domestic investors accounting for a much larger share of purchases so far this fiscal year while overseas demand has weakened substantially, Reuters reported.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)