Last Week Japan Long-Term Bonds Net Purchase of 10 Trillion
As expectations grow that the Bank of Japan (BOJ) will end its negative interest rate policy next week, foreign investors are flocking to Japanese bonds.
According to foreign media reports citing data from the Japanese Ministry of Finance on the 14th (local time), foreign investors net purchased long-term Japanese bonds worth 1.15 trillion yen (approximately 10.279 trillion KRW) last week. This is the largest weekly net purchase since April 2023.
Foreign capital net purchased short-term Japanese bonds worth 2.22 trillion yen (approximately 19.843 trillion KRW) last week. The net purchase amount the previous week was about 2.75 trillion yen (approximately 24.5803 trillion KRW).
The reason foreign investors are buying Japanese government bonds is due to expectations of an interest rate hike. Foreign media, citing sources, reported that the BOJ will discuss ending the negative interest rate policy next week depending on the results of wage negotiations (Chuntu) by large corporations. BOJ Governor Kazuo Ueda has stated that the results of this year’s wage negotiations are very important in deciding the timing to end the negative interest rate policy.
Recent wage negotiation results among Japanese companies have been positive. Toyota announced it will raise monthly wages by 28,440 yen (approximately 250,000 KRW), the largest increase in 25 years, and Nissan said it has agreed to raise wages by 18,000 yen (approximately 160,000 KRW), the largest increase since 2005. Rengo (Japanese Trade Union Confederation), Japan’s largest labor union, plans to compile and announce the first wage negotiation results on the 15th. The BOJ will hold a monetary policy meeting on the 18th and 19th.
Expectations for the end of the negative interest rate policy have increased this year, causing Japanese government bond yields, which had been stagnant until last year, to rise. The 1-year yield rose about 8 basis points this year to 0.067%, the highest in about 10 years, and the 6-month yield, which had been negative for 8 years, also increased. Foreign media explained, "Bond yields rise when prices fall," adding, "High yields can attract new investors."
Foreign investors have continued their buying momentum, net purchasing Japanese stocks for two consecutive weeks. Last week, they net purchased cash stocks and derivative contracts worth 176.39 billion yen (approximately 1.5778 trillion KRW) and 21.96 billion yen (approximately 19.64 billion KRW), respectively.
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