Global Market: Foreign investors dump Japanese bonds as BOJ tightening weighs on sentiment

Foreign investors recorded their largest weekly outflow from Japanese bonds in the week ended September 26, amid a global bond-market selloff and expectations of further Bank of Japan policy tightening, Reuters reported.

Foreign investors sold a net 4.61 trillion yen ($29.16 billion) worth of Japanese bonds during the week, marking the largest weekly outflow since March 28, according to Ministry of Finance data cited by Reuters.

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Foreign investors recorded net sales of 1.34 trillion yen in long-term Japanese bonds, marking the highest weekly outflow since July 25. Net foreign withdrawals from short-term bills rose to 3.27 trillion yen, the highest level in six months.

The Bank of Japan raised its key policy rate to 1.25% last month, its highest level in 31 years, and signalled that further hikes may be needed as persistent inflationary pressures, including elevated crude oil prices, continue to pose risks. Reuters reported that the policy shift has added to investor concerns over the outlook for Japanese bond prices.

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The benchmark 10-year Japanese government bond yield climbed to 3.115% last week, its highest level since August 1996, amid inflation concerns and expectations of further monetary tightening.

Foreign investors also remained net sellers of Japanese equities for a third consecutive week, with outflows totalling 362 billion yen during the period.

Meanwhile, Japanese investors sold 684.5 billion yen worth of foreign long-term bonds, marking their second consecutive week of net selling, while purchasing 130.9 billion yen of foreign short-term bills.

Japanese investors also bought 225.8 billion yen worth of foreign equities, extending their net buying streak to three consecutive weeks.

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