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Japan investors resume foreign bond buys, longer-term demand intact
May 28, 2015 / 2:26 AM / 2 years ago

Japan investors resume foreign bond buys, longer-term demand intact

TOKYO, May 28 (Reuters) - Japanese investors resumed their purchases of foreign bonds this month amid a low-yield home environment, as underlying demand for the overseas instruments resurfaced after a bout of profit taking in April.

The Finance Ministry released weekly capital flows data on Thursday showing their net purchases of foreign bonds were around 2.4 trillion yen ($19.4 billion) in the first three weeks of May.

Japanese investors had reversed an established trend in April by offloading a net 2.86 trillion yen of foreign bonds. It was only their second month of net selling during the past year.

Market participants attributed some of the selling in April to profit taking as many sovereign debt yields fell to record lows in the middle of last month.

Japanese investors have increasingly turned from low-yielding Japanese government bonds to foreign assets that offer higher returns like U.S. Treasuries.

Under the Bank of Japan’s powerful quantitative easing scheme, the 10-year JGB reached a record low 0.195 percent in January. It was at 0.40 percent on Thursday.

Appetite for foreign debt from Japanese investors looks to remain firm in the longer term. Japanese life insurers, which collectively manage more than 180 trillion yen of assets, look to keep buying foreign bonds this financial year.

The trillion-dollar Government Pension Investment Fund, the world’s largest pension fund, has also been diversifying from JGBs into other assets including foreign bonds, and other public funds have been following their lead.

$1 = 123.70 yen Reporting by Shinichi Saoshiro; Editing by Simon Cameron-Moore

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