Japanese investors pulled back from overseas debt for a third straight week through October 3. According to Reuters via Free Malaysia Today, surging US Treasury yields and better returns at home reduced appetite for foreign bonds. Ministry of Finance data show a net sale of 503.6 billion yen (about US$3.19 billion).

Key Numbers

  • Foreign bond sales: a net 503.6 billion yen in the week to October 3. This was the smallest weekly total of the past three weeks.
  • Foreign stocks: Japanese investors bought a net 1.32 trillion yen of overseas equities, their biggest weekly purchase since August 15.
  • JGB auction: Japan's 10-year bond auction on October 6 produced an average yield of 3.101%, up from 2.995% at the September 1 sale. Demand held up, with the bid-to-cover ratio rising to about 3.76 from 3.29.

Why Japan Is Pulling Back

PGIM strategist Guillermo Felices said Japanese investors who have been hunting for yield overseas now have reason to bring funds home. Higher domestic yields and costly currency hedging make overseas debt less attractive. A fixed-income analyst quoted in earlier coverage said this is making Japan a less reliable buyer of global bonds.

France Is Part of the Story

Sumitomo Mitsui DS Asset Management said it recently sold some French government bonds in favor of German and Japanese debt. France's borrowing costs have climbed to their highest since the 2000s.

Why It Matters

Japan is the largest foreign holder of US Treasuries, and Japanese investors have long been among the biggest buyers of overseas debt. Less demand from Japan could add upward pressure to government bond yields at a time when inflation remains sticky and public debt is large. Sales of foreign bonds also come as global yields hit multi-decade highs, driven by energy prices and the war in the Middle East.

What We Don't Know

  • The data do not show which countries' bonds were sold. They do not say the selling was aimed at US Treasuries.
  • Three weeks of net selling is not yet a trend, and the weekly total shrank.

Key Takeaways

  • Japanese investors sold a net 503.6 billion yen of foreign bonds in the week to October 3, their third straight week of selling.
  • Rising JGB yields and expensive hedging make home markets more attractive.
  • Japan's role as a steady buyer of global debt is being tested.