Takaichi rally, AI optimism boost inflows into Japanese stocks

Japanese stocks witnessed substantial foreign inflows in the week through October 25 as investors bet on large-scale stimulus under Prime Minister Sanae Takaichi's administration, with optimism over AI-related investment lifting sentiment further. Japanese stocks drew approximately 1.34 trillion yen ($8.89 billion) of net inflows during the week, extending a recent run of inflows into a fourth straight week, data from Japan's Ministry of Finance showed.

The Nikkei 225 index surged to a record 51,620.79 on Thursday amid bets that Japan would flip into an inflationary economy under Takaichi's government. The Nikkei has gained about 14.8% so far this month, the most since November 2020.

Japanese stocks have seen nearly 6.63 trillion yen of foreign inflows so far this year, with about 6.46 trillion yen coming in just over the past four weeks. Foreigners had invested roughly 3.55 trillion yen in local stocks in the same period last year. Japanese long-term bonds, on the other hand, logged a second week of outflows last week, to the tune of 253.5 billion yen.

Foreigners also divested 2.03 trillion yen worth of short-term bills as they ended a three-week trend of net purchases. Japanese investors, meanwhile, ditched 62.1 billion yen worth of foreign stocks, booking weekly net sales for the fifth time in six weeks.

They also pulled 351.4 billion yen from foreign long-term bonds but added a net 119.2 billion yen worth of short-term bills. ($1 = 150.7800 yen)