By Hideyuki Sano
TOKYO, June 26 (Reuters) - Japanese investors sped up their
buying of foreign bonds in recent weeks, data from Ministry of
Finance showed on Thursday, as persistently low domestic yields
prompted them to seek higher returns abroad.
Japanese investors bought 1.4865 trillion yen ($14.6
billion) of foreign bonds last week, their largest net buying
since the first week of August.
They accelerated their acquisitions in June, with their net
buying during the first three weeks of the month amounting to
3.4542 trillion yen ($33.9 billion), the largest purchase on a
three-week rolling basis since August 2010.
Their rush to foreign bonds partly reflected a growing view
that monetary policy in both the United States and Europe will
But it also shows that, a year after the Bank of Japan
started monetary easing at an unprecedented scale, Japanese
investors reacted to the policy by moving funds abroad.
"The impact of low Japanese yields is big. Investors who had
not bought foreign bonds in the past are starting to buy foreign
bonds this financial year," said Tomoaki Shishido, fixed income
analyst at Nomura Securities.
The BOJ's radical policy, started in April last year,
initially caused huge volatility in the bond market. But after
the dust settled, the 10-year JGB yield appeared
to become stuck - almost pegged - around 0.6 percent.
The BOJ currently buys over 7 trillion yen of JGBs per
month, or about 70 percent of the amount supplied by the
Ministry of Finance.
Right after the BOJ started that policy, however, Japanese
investors sold foreign bonds, despite widespread speculation
that they would buy more foreign bonds instead of Japanese
In April-June last year, they sold a net 4.3983 trillion yen
of foreign bonds, locking in profits rather than boosting their
That flow is now completely reversed. Since the start of the
current financial year in April, they have bought 5.2 trillion
yen worth, which is seen as one reason bond yields in the U.S.
and Europe slumped this quarter.
The 10-year U.S. debt yield hit a one-year low of 2.40
percent in May, puzzling many investors who had
expected yields to rise on the prospect of a solid recovery in
the U.S. economy.
The 10-year German Bunds yield fell to
one-year low of 1.268 percent just on Wednesday, helped by a
series of easing steps taken by the European Central Bank (ECB).
Japanese investors' hefty buying of U.S. Treasuries and
German Bunds, however, has not led to a weakening in the yen so
far, suggesting a large part of investment is made with currency
hedging in place.
The Japanese currency has hardly moved this quarter, with
the dollar trading in a narrow band between 100.81 and 104.13
yen. It stood at 101.77 yen on Thursday.
($1 = 102.0500 Japanese Yen)
(Reporting by Hideyuki Sano; Editing by Eric Meijer)