Foreign investors are increasing their presence in the Japanese market.

The movement sometimes greatly influences the direction of the investor.

Japanese government bonds and Japanese stocks were the focus of foreign investment in July.

Among them, the amount of net long-term government bond purchases reached a record high.

I interviewed why Money went to Japan.

(Economic Department reporter Keiichiro Furuichi)

The amount of net purchases of Japanese government bonds by foreigners hits a record high

The JGB trading volume for July released by the Japan Securities Dealers Association on August 22 shows that foreign investors were net buyers of Japanese government bonds.

The net purchase amount is actually 5,358.2 billion yen.

It is the largest since 2004 when data are available.



In the JGB market, there was a fierce battle between foreign investors and the Bank of Japan in June, the previous month.



As global prices continue to rise, the Bank of Japan may be forced to change policies like the central banks of Europe and the United States. It turned out to be over the limit.



In response, the Bank of Japan responded with a “limit-price operation,” which purchases unlimited amounts of government bonds.

The amount of long-term government bonds purchased in one month exceeded 16 trillion yen, more than double the amount in the previous month.

What is Limit Price Operation?

After the battle in June, foreign investors changed their investment stance and strengthened their stance to buy Japanese government bonds.



As a result, the long-term interest rate, which temporarily rose to 0.265% on June 17, temporarily fell to 0.175% in late July.



Foreign investors now account for nearly 20% of the Japanese long-term government bond market, and their presence is increasing.

Net purchases of Japanese stocks Nikkei stock average rises

Next is the stock market, where overseas investors account for 70% of the trading share. Looking at the trading trend announced by the Tokyo Stock Exchange in July, overseas investors net bought 1.7388 trillion yen in total for cash and futures. I was.

It is the largest buyer in the sector.



The Nikkei Stock Average rose by more than 1,400 yen in the month of July, indicating that overseas forces supported the rise in stock prices during this period.

The reason is the influence from America

In the market coverage so far, I had the impression that Japanese government bonds were traded as an investment destination for investors to avoid risk, while Japanese stocks were traded as an investment target for taking risks.



So why did foreign investors buy Japanese government bonds and Japanese stocks at the same time in July?



When asked to market participants, more investors expected the US economy to slow down and inflation to peak out, and the Fed = Federal Reserve Board rate hikes slowed down. I gave it to



In the meantime, in the United States, a series of economic indicators were announced that suggested an economic slowdown, such as the growth rate of GDP (gross domestic product) for the April-June quarter being negative for the second consecutive quarter, but the pace of interest rate hikes may be slowed down. Stock prices have risen on hopes.



This spread to Japan, and overseas investors are believed to have strengthened their stance to buy Japanese stocks.



On the other hand, changes in the view of US monetary policy led to a decline in long-term interest rates, which in turn increased downward pressure on Japanese interest rates.

This is believed to have led to the movement of overseas investors to return to Japanese government bonds.

Spotlight on Japan, which is behind the times?

Some market insiders gave another interesting reason.



Europe and the United States were among the first to turn away from the COVID-19 pandemic, and normalization of economic activities has progressed at a rapid pace.

It is the view that foreign investors may have strengthened their stance to buy Japanese assets due to these high expectations.



This market insider said, ``Overseas investors may have focused on Japan, which is lagging behind, and expected the size of the growth potential.''



Another market insider said, ``If raw material prices decline due to the economic slowdown in the United States and China, it will become easier to procure raw materials, which may have a positive effect on the Japanese economy.''

Will it be a Midsummer Night's Dream?

However, this optimism appears to have receded in late August.



There is a deep-rooted sense of caution that US monetary tightening may accelerate, and it is difficult to see a sense of direction in both the Japanese stock market and the government bond market.



"Even though overseas expectations for Japan are relatively high, it seems that there is no change in the composition that it will be influenced by the monetary policy of the United States." The fact that foreign money went to Japan in July is like a "Midsummer Night's Dream"



.



Where are foreign investors going in the future?

I would like to explore the direction of the Japanese market by carefully watching its whereabouts.

attention schedule

The first thing to pay attention to is the movement of the financial market after the 29th.



The Jackson Hole conference will be held in Wyoming, USA from the 26th, but global market players are paying attention to what kind of reference will be made by FRB Chairman Powell to the pace of future monetary tightening.



Towards the end of the week, there will be a series of important economic data releases in the United States.

Attention will be paid to the index that indicates the business sentiment of the manufacturing industry and the contents of the employment statistics.