Overseas investors return to Japanese bonds after minister’s pension fund signal

Foreign investors purchased Japanese government bonds for ⁠the first time in six weeks in the week ended July 11 after Finance Minister Satsuki Katayama signaled that state pension funds ​could shift allocations toward domestic assets.

Overseas investors ‌bought ‌a net ¥499.8 billion ($3.08 billion) ​of Japanese long-term bonds, their first weekly net purchase since May 30. Short-term ⁠bills, however, saw net foreign outflows of ¥ 589.7 billion, data from the Ministry of Finance showed.

The 10-year JGB yield ​has slipped about ⁠20.5 basis points from a nearly 30-year high of 2.9% last week, ⁠after Katayama said ​the government aims to steer ​the country’s vast state pension funds ​toward “substantially” ‌increasing investments in domestic assets.

Japan’s $1.8 trillion Government Pension Investment Fund currently maintains roughly equal allocations to domestic equities, foreign equities, domestic ‌bonds and foreign bonds.

Japanese stocks, meanwhile, recorded ¥745.6 billion in foreign inflows during the week, as overseas investors snapped a two-week ​selling ​streak.

Elsewhere, Japanese investors pumped a ​net ¥745.7 billion into foreign short-term ⁠debt securities and ¥1.09 trillion into long-term bonds, marking their largest weekly net purchase since May 9.

They also invested ​a net ¥196.2 billion in foreign stocks, extending their recent buying trend into a fourth successive week.