Japanese Investors Withdraw from Foreign Stocks for Third Month

(Reuters) – Japanese investors sold foreign stocks for a third straight month in July, taking profits after a steep rally left valuations stretched. They channeled large sums into higher-yielding foreign bonds, as a weakened yen boosted returns.

According to data from Japan’s Ministry of Finance released on Friday, Japanese investors withdrew approximately 536.4 billion yen ($3.64 billion) from foreign equities in July, following the sale of 1.99 trillion yen worth of foreign stocks in the previous month.

Meanwhile, Japanese investors snapped up 3.63 trillion yen worth of foreign bonds in July, marking a third monthly net purchase. The yen dipped approximately 4.5% against the dollar last month, the sharpest since December 2024.

Trust accounts (pension funds) sold foreign stocks and bought long-term bonds on a net basis for a third straight month, divesting a net 1.52 trillion yen worth of foreign equities while acquiring a net 419.6 billion yen worth of long-term bonds.

July’s net foreign equity investments by Japanese bankers, investment trust management companies, and insurers stood at 445.5 billion yen, 333.5 billion yen, and 207.1 billion yen, respectively.

Overseas bond markets received 3.82 trillion yen worth of Japanese investments in long-term bonds, but short-term bills experienced a net divestment of 196.6 billion yen.

Separate data from the Bank of Japan showed that Japanese market participants bought a net 5.73 trillion yen worth of U.S. bonds in the first half of the year, down from net purchases of 6.4 trillion yen a year ago. They also invested 2.37 trillion yen in European debt securities during the first half, with significant investments in French and German bonds totaling 702 billion yen and 494 billion yen, respectively.

($1 = 147.3800 yen)