Japanese Investors Net Sell Foreign Bonds for Five Consecutive Weeks, Marking Longest Selling Streak in Four Years
nashnova research
Japanese investors sold foreign bonds for a fifth consecutive week, dumping roughly ¥3.43 trillion over the stretch and pushing year-to-date net sales to the highest since 2022 — a sign that rising domestic yields are pulling capital home.
How large is this sell-off?
In the week to October 17, Japanese investors net-sold ¥161.6 billion (≈$1.02 billion) in foreign long-term bonds, plus ¥156.9 billion in short-term bills.
Over five weeks, cumulative net sales of foreign long-term bonds reached roughly ¥3.43 trillion. Year-to-date net sales hit ¥5.18 trillion — the largest for the period since 2022.
This means → this is not a one-off trim but a systematic withdrawal stretching nearly six weeks.
The pace slowed this week — is the trend fading?
This week's single-week selling was the smallest of the five-week streak.
The direct trigger: the US 10-year yield pulled back about 27 basis points from its 24½-year high of 5.3645% reached earlier this month, as doubts over AI prospects rattled equities and drove safe-haven flows into Treasuries.
In plain terms = Treasury prices rose, yields fell, and selling pressure from Japanese investors eased — but a slower week does not mean the trend has reversed.
Why is Japanese capital flowing home?
The core driver is domestic: Japan's 10-year benchmark yield has climbed more than 80 basis points this year. It has eased from its 30-year high touched in October, yet the absolute level is now attractive enough to compete with overseas bonds.
This means → as domestic returns improve, the extra appeal of foreign bonds — what economists call the substitution effect — shrinks. Put simply = when home bonds pay well enough, investors stop reaching abroad.
Europe is not helping either: France's 10-year yield hit a 24-year high of 5.022%, but large-scale domestic protests have introduced political risk that undermines the appeal of European debt.
Who is driving the selling, and what comes next?
Domestic Japanese banks have led this year's foreign-bond sell-off.
Life insurers have signaled they will maintain or increase domestic bond purchases in the second half of the fiscal year. Japanese life insurers manage roughly $2.5 trillion in assets, about one-quarter allocated overseas.
This means → this week's focus is the life insurers' investment-plan disclosures. If they, too, begin repatriating overseas positions, the capital-reflow trend extends well beyond banks alone.
Are foreign investors buying Japanese bonds in return?
Foreign investors were net buyers of Japanese long-term bonds for a third straight week, purchasing ¥1.45 trillion in the latest period.
Yet they net-sold ¥2.24 trillion in short-term bills — the largest weekly sale in three weeks.
In plain terms = foreign money is "buying long, selling short" — betting Japan's long-term rates still have room to run while avoiding short-dated paper.
On equities, Japanese investors net-bought ¥128.3 billion in foreign stocks, the fifth weekly net purchase in six weeks — pulling out of bonds while adding to equities, a clear divergence in allocation logic.
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