Japanese investors sold the largest amount of overseas bonds since 2024 last month, as higher domestic yields prompt a potential repatriation of funds. Preliminary figures from the Ministry of Finance show net sales of ¥3.42 trillion in February, the biggest monthly total since October 2024.
Japanese investors offloaded overseas bonds in record volume during February amid rising domestic yields, signaling possible fund repatriation. According to preliminary weekly data released Thursday by the Ministry of Finance, net sales reached ¥3.42 trillion ($21.8 billion), marking the largest monthly figure since October 2024. The majority of these sales occurred in the week ending February 20.
Ayako Sera, senior market strategist at Sumitomo Mitsui Trust Bank in Tokyo, noted that declines in Japanese government bonds are compelling life insurers to record impairment losses, potentially leading them to realize gains on foreign bonds to manage profits. She added that demand for foreign bonds has likely softened due to the uptick in domestic yields.
A Thursday auction for 30-year Japanese Government Bonds (JGBs) suggested improving investor appetite, with the bid-cover ratio surpassing its 12-month average following recent selloffs. Japan's benchmark 10-year yield dropped 13 basis points in February, its first decline in eight months.
Hiroe Oizumi, general manager of the fixed income group at Fukoku Mutual Life Insurance's securities investment department, explained, "We've been selling low-yield foreign bonds and shifting them into yen-denominated bonds since last April." He continued, "We plan to maintain the current position for the time being, adjusting the balance based on foreign exchange trends."
Market observers are closely monitoring these flows to assess whether the shift toward domestic bonds will persist.
