In September, Japanese investors withdrew from foreign bond markets for the second consecutive month.

Reuters, October 8 - In September, Japanese investors were net sellers of foreign bonds for the second consecutive month, as rising borrowing costs in the United States and Europe, along with increasingly attractive domestic yields, prompted them to withdraw from overseas bond markets.

Data released by Japan's Ministry of Finance on Tuesday showed that last month, Japanese investors were net sellers of 969 billion yen ($613 million) in foreign bonds, down from the previous month's net selling of 1.16 trillion yen.

They were net sellers of 1.43 trillion yen in long-term foreign currency bonds—the highest in six months—while purchasing about 457 billion yen in short-term notes.

The rise in Japanese interest rates is starting to attract some of the country's vast overseas investment back home, marking a significant shift in global capital flows.

So far this year, Japanese investors have been net sellers of approximately 5.08 trillion yen in foreign bonds, the highest level since 2022. This outflow could support the yen's exchange rate and put pressure on bond markets that have relied for decades on Japanese buyers.

Soaring energy costs have heightened inflation fears, prompting the US Federal Reserve (FED) (link) and the European Central Bank (link) to raise interest rates in September, bringing further pressure to global bond markets.

Earlier this week, Japan's benchmark 10-year government bond yield rose to 3.122%, a 30-year high, enhancing the appeal of domestic bonds.

In September, the Bank of Japan led the selling of long-term foreign bonds, with a net sell-off of 2.49 trillion yen, the highest in seven months. Life insurance companies and investment trust management companies also recorded net sell-offs of 288.6 billion yen and 200.1 billion yen, respectively.

However, trust accounts were net buyers of 1.2 trillion yen in long-term foreign currency bonds, highlighting divergent investment strategies among Japanese institutional investors.

Another report from the Bank of Japan showed that in the first eight months of this year, Japanese investors were net sellers of 4.74 trillion yen in US bonds, while being net buyers of 355.85 billion yen in European bonds.

Within Europe, Japanese investors were net buyers of 329.82 billion yen in Italian bonds, while being net sellers of 208.59 billion yen in French bonds and 94.25 billion yen in German bonds.

(1 USD = 158.1400 yen)

(To accommodate non-English speakers, Reuters provides automated translations of its reports into several languages. Due to possible inaccuracies or lack of necessary context in automated translations, Reuters does not guarantee the accuracy of the translated text and offers it solely for readers' convenience. Reuters is not liable for any damage or loss arising from the use of automated translation functions.)