Synopsis:

MUFG highlights significant investment trends among Japanese and foreign investors, noting a record purchase of foreign equities by Japanese investors despite the recent unwind of the yen carry trade.

Key Points:

1. Foreign Investors' Activity:

   • Japanese Bonds: Foreign investors were net sellers of Japanese bonds, totaling JPY 1.16 trillion during the week of the BoJ’s policy update. This followed net purchases of JPY 1.21 trillion the previous week. Since the start of April, foreign investors have sold a net total of JPY 2.99 trillion of Japanese bonds.
   • Japanese Equities: Foreign investors sold Japanese equities for the third consecutive week, amounting to a net JPY 642 billion. Despite this, foreign investors have purchased a net total of JPY 4.06 trillion of Japanese equities so far this fiscal year.

2. Japanese Investors' Activity:

   • Foreign Bonds and Equities: Japanese investors were net buyers of both foreign bonds and equities in the latest week, purchasing a net JPY 670 billion in bonds and JPY 1.29 trillion in equities. The purchase of foreign equities was a record amount for a single week.
   • Impact of Yen Carry Trade Unwind: Concerns have arisen that the recent unwind of the yen carry trade could lead Japanese investors to sell foreign securities. However, this has not materialized, as evidenced by the continued purchase of foreign assets.

3. Market Dynamics:

   • The Ministry of Finance (MoF) weekly report on international transactions in securities provides insights into these investment trends.
   • Despite market volatility and the BoJ policy changes, Japanese investors remain active in purchasing foreign securities, indicating resilience and a diversified investment strategy.

Conclusion:

MUFG reports that Japanese investors have continued to invest heavily in foreign equities, reaching record levels, even amidst the yen carry trade unwind. This activity contrasts with foreign investors' recent net selling of Japanese bonds and equities, highlighting different strategic responses to market conditions and policy updates.