Inflows Into Local Stocks Continues, Likewise Local Bonds

Offshore investors continued to purchase local equities last week, with a slight step up in flows versus the prior week. We have now seen positive inflows into Japan equities for 9 out of 10 weeks in 2024 to date. The litmus test may be as we progress into next week with the key BoJ meeting in focus. Japan equities have moved off highs over the past week, as speculation mounts of a potential end to NIRP. The BoJ outlook though could be equally important, as the central bank has stressed financial conditions will remain easy post any shift and that an aggressive tightening cycle is unlikely.

• There was a noticeable pick up in offshore purchases of Japan bonds. Interestingly, last week's ¥1152.6bn net inflow was the strongest since the start of April last year. Still, the pace of net inflows into local bonds is running at about half the pace of equivalent inflows into local equities in 2024 to date.
• Japan buying of offshore bonds picked up noticeably as well. This was the strongest weekly outflow since Dec last year. Local investors sold offshore equities though, for the second consecutive week. YTD Japan purchases of offshore equities is only marginally positive.

Table 1: Japan Weekly Investment Flows

Source: MNI - Market News/Bloomberg