Foreign investors pulled out a net 1.02 trillion yen from Japanese stocks in the week through December 21, marking the largest weekly outflow in three months. This withdrawal was driven by expectations of a cautious pace for U.S. Federal Reserve rate cuts in 2025.
The latest data from Japan’s Ministry of Finance revealed the largest foreign sales since September 21. The outflows come on the heels of the U.S. Federal Reserve signaling a more measured approach to easing next year, alongside a quarter-point rate cut as anticipated.
Despite these withdrawals, the Nikkei index fell 1.95% last week, but has since rebounded with a 1% gain this week. This uptick follows a cooler-than-expected U.S. inflation report, which fueled hopes for further Fed rate cuts in the coming months. Additionally, the Japanese yen weakened as expectations for a potential Bank of Japan rate hike in January diminished.
So far this year, foreign investors have purchased 738.3 billion yen worth of Japanese stocks, a stark contrast to the 3.35 trillion yen in net purchases made during the same period last year.
Meanwhile, Japanese long-term bonds saw a substantial 1.95 trillion yen in foreign outflows last week, the largest since September, and foreign investors also sold 2.96 trillion yen worth of short-term debt securities.
On the other hand, Japanese investors have shown a positive outlook, buying 181.5 billion yen in foreign equities, marking their second consecutive week of net purchases. However, they continued to divest from long-term foreign bonds, with a net 919.2 billion yen in sales, marking their fourth weekly net sale in the past six weeks.
