Foreign investors massively buy Japanese bonds in July

Foreign investors bought record amounts of long-term Japanese bonds in July as forecasts that the Bank of Japan (BOJ) will adjust its monetary policy faded.

Foreign funds bought a net 5.06 trillion yen of Japanese bonds, mainly Japanese government bonds, compared with net sales of 4.1 trillion yen in June. This is the highest net sales figure since 2020.

As the BOJ maintains its low-interest rate policy, it controls the 0.25% cap on government bond yields and its record-breaking purchases last month.

The Japanese bond market has been beset by speculation this year. Investors assume that rising global inflation will put pressure on the BOJ to adjust its monetary policy. But now inflation fears have raised concerns that raising interest rates to curb global inflation would undermine economic growth.

Japanese benchmark rates fell to 0.175% in July after rising above the BOJ’s 0.25% target in June.

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