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Japanese investors remain big sellers of overseas bonds in March

Japanese investors were big sellers of overseas debt in March, as prices of overseas bonds declined on concerns over inflation and aggressive tightening measures by major central banks.

According to Japan’s Ministry of Finance data, domestic investors exited a net 2.36 trillion Japanese yen worth of overseas bonds last month, after selling a net 3.2 trillion in February.

They also sold foreign equities worth $455.7 billion yen, after buying them in the previous month.

“Selling of foreign bonds increased later in the month, indicating that they became more worried about a hawkish pivot from the Federal Reserve around the FOMC,” said Naka Matsuzawa, chief Japan macro strategist at Nomura.

The big sales by local investors come despite a sharp decline in the Japanese yen in the last month.

“JPY collapsed in March, just at the time when local investors were bringing almost unprecedented amounts of capital home,” Adam Cole, chief currency strategist at RBC Capital Markets said in a note.

He added that many of the bonds sold were likely held on an FX hedged basis, implying limited FX flow and reflecting the low cost of hedging in all G10 markets for the last two years.

The cumulative sales of foreign bonds and equities in the first quarter of this year stood at 5.28 trillion yen, the biggest net selling in eight years.

The Bank of Japan (BoJ) in its monetary policy meeting in March, maintained its massive stimulus amid uncertainty over the global outlook, reinforcing expectations it would remain an outlier in the global shift towards tighter monetary settings.

The data from Bank of Japan showed Japanese investors sold U.S. bonds and equities worth 3.11 trillion yen and 127 billion yen, respectively, in the first two months of this year.

However, they purchased 1.16 trillion worth of European bonds in the same period and sold 232 billion yen in European equities.

Japanese investors also offloaded Chinese bonds of 294.69 billion yen and equities of 25.26 billion yen, data up to February showed.
Source: Reuters (Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Amy Caren Daniel)

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