Foreign Confidence Soars: Record Inflows into Japanese Bonds

Japanese bonds experienced their largest foreign inflow in four weeks, with 2.5 trillion yen purchased in the week ending February 28. This surge came as Prime Minister Sanae Takaichi's commitments to fiscal discipline and rising yields made the bonds particularly attractive to overseas investors.

Amidst a rise in bond yields to 2.15% spurred by escalating oil prices due to Middle East tensions, foreign investors showed a strong appetite for Japanese debt. The trend pointed to renewed inflation concerns, prompting net purchases of 1.37 trillion yen worth of long-term and 1.14 trillion yen in short-term bonds.

While the Nikkei index saw a sharp decline, foreign interest in Japanese equities remained strong, marking a tenth consecutive week of net purchases. Conversely, Japanese investors continued divesting foreign long-term bonds, amid a fourth consecutive week of net sales.