Japanese investors boost foreign stock purchases on Fed rate-cut hopes

JAPANESE investors raised their holdings in foreign stocks, driven by a benign US core inflation report that fuelled expectations of Federal Reserve cuts and boosted global equities, while a strong yen also lifted domestic buying power.

They invested a net 489.8 billion yen (S$4.2 billion) into overseas stocks, for a sixth straight week through Jan 18, marking their second-largest weekly net purchase since Sep 7, 2024, according to data from Japan’s Ministry of Finance.

Analysts noted that the investment in foreign stocks was also driven by increased flows into the new Nippon Individual Savings Accounts (NISA) programme, a tax-free investment scheme, and they expect such investments to persist through March.

US core inflation data for December reported a 3.2 per cent increase last week, slightly below the forecast of 3.3 per cent. Strong fourth-quarter earnings from major firms such as JPMorgan, BlackRock and Goldman Sachs lifted the MSCI World Index by 2.56 per cent, marking its largest weekly gain since Nov 8, 2024.

Japan’s market participants also acquired foreign debt securities of a net 1.01 trillion yen, the highest for a week since Nov 9. They poured 819.3 billion yen into long-term bonds and 194.2 billion yen into short-term bills.

At the same time, Japanese stocks witnessed a marginal 66.1 billion yen worth of foreign outflows last week, contrasting 259.1 billion yen in inflows in the previous week.

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Japan’s Nikkei share average reached a 1½-month low of 38,055.68 last week, weighed down by a stronger yen and investor caution ahead of US President Donald Trump’s inaugural speech.

The Nikkei, however, has climbed nearly 3.5 per cent so far this week, powered by SoftBank Group and other technology stocks, as Trump announced a private sector investment of up to US$500 billion to fund AI infrastructure.

Foreign investors bought a net 876.1 billion yen in Japanese long-term bonds, the largest purchase in six weeks, while also adding a net 1.33 trillion yen worth of short-term bills last week. REUTERS