Japanese investors significantly increased foreign stock purchases last week, driven by easing inflation concerns and softer U.S. labor market data. According to data released by Japan's Ministry of Finance and reported by Reuters, Japanese investors bought a net 824.5 billion yen ($5.08 billion) worth of overseas stocks during the week ended July 4. The inflow marked the strongest weekly buying since April 4, reflecting improved investor sentiment toward global equities.
The buying spree came after oil prices dropped to their lowest levels in more than four months last week, helping ease inflation worries that had weighed on financial markets. Lower energy prices strengthened expectations that inflationary pressures could continue to moderate, reducing the likelihood of additional monetary tightening by the Federal Reserve. As reported by Reuters, Federal Reserve Chair Kevin Warsh reiterated that the U.S. central bank remains committed to its 2% average annual inflation target, while indicating that inflation risks stemming from conflict-related price shocks had eased.
However, the decline in crude prices proved short-lived as Brent crude rebounded more than 5% to $78.02 per barrel on Wednesday after renewed geopolitical tensions in the Middle East reignited concerns over potential supply disruptions. This added fresh uncertainty to the inflation outlook, potentially complicating global central bank policy decisions in the coming months.
While Japanese investors increased exposure to foreign equities, they continued reducing their holdings of overseas debt. Net sales of foreign long-term bonds totaled 218.1 billion yen during the week, marking the second consecutive week of divestments. Investors also sold 124.3 billion yen worth of short-term foreign bills, suggesting continued caution toward global fixed-income markets amid evolving interest-rate expectations.
Foreign investors remained net sellers of Japanese stocks, although the pace of selling slowed significantly. According to Reuters, overseas investors sold a net 22.2 billion yen worth of Japanese equities during the week, a sharp improvement from the hefty 1.82 trillion yen in net outflows recorded in the previous week. Foreign selling of Japanese government bonds also moderated, with overseas investors trimming their holdings of long-term Japanese bonds by a net 5.9 billion yen, representing the smallest weekly outflow in five weeks.
