Foreign Investors Shift Focus from Japanese Stocks to Bonds Amid Nikkei's Record Highs

Foreign investors have altered their investment strategies in Japan as the Nikkei share average surged to its highest level in over three decades, prompting a significant shift in market activity. Data from Japanese exchanges revealed that foreign investors, after weeks of consistent buying, turned into net sellers of Japanese stocks in the week ending Nov. 24, totaling a substantial 423.31 billion yen ($2.88 billion) in sales. The surge in the Nikkei index to a remarkable 33-year peak at 33,853.46 triggered profit-taking among investors, contributing to the foreign sell-off. Despite the index's impressive 8% increase this month, resistance at this historic level led many investors to cash in their profits. Additionally, the recent rebound of the yen against the dollar added pressure on Japanese exporters, potentially affecting their profit forecasts. This change in sentiment marks a significant contrast to the considerable influx of 6.57 trillion yen poured into Japanese stocks by foreign investors earlier this year, showcasing a notable shift in investment attitudes over a short period. Meanwhile, foreign investors pivoted towards long-term Japanese bonds, securing around 864.1 billion yen in a second consecutive week of net purchases. However, they made a stark reversal in short-term debt securities, exiting approximately 2.57 trillion yen after a week of 2.05 trillion yen in purchases. Japanese investors mirrored this trend by divesting 209.8 billion yen from foreign equities last week, a substantial shift from the prior week's net buying of about 120.7 billion yen. Simultaneously, domestic investors became net sellers, offloading approximately 84.5 billion yen of long-term and 19.8 billion yen of short-term overseas bonds. This nuanced market movement demonstrates a dynamic response from investors in light of the Nikkei's record highs and fluctuating currency dynamics, indicating a recalibration of investment portfolios toward more stable options amidst uncertain market conditions.