- Key Points
- Japan markets saw a record month of foreign purchases of its equities and long-term bonds in April.
- Japanese assets are generally considered a haven, whose appeal rose as the “sell-U.S.” narrative gained ground in April, said Rashmi Garg, senior portfolio manager at Al Dhabi Capital.
- “It was quite an exceptional month, when you consider everything that has happened in the global macroeconomic environment,” said Kei Okamura, Neuberger Berman’s SVP and Japanese equities portfolio manager
A man walks past an electronic board showing the Nikkei 225 index on the Tokyo Stock Exchange along a street in Tokyo on April 7, 2025.
Kazuhiro Nogi | AFP | Getty Images
Japan noticed record overseas inflows into its equities and long-term bonds in April as investors fled U.S. Markets following President Donald Trump’s change salvo toward friends and foes alike.
Overseas investors sold eight.21 trillion yen ($56.6 billion) worth of equities and long-term bonds in April, according to government facts. The net inflows have been the most important for a calendar month because Japan’s finance ministry started out collecting facts in 1996, in keeping with Morningstar.
“Trump tariff shocks likely modified international traders’ outlook on the U.S. Economy and overall asset performance, which likely caused diversification far from the U.S. To other fundamental markets along with Japan,” stated Yujiro Goto, Nomura’s head of FX strategy in Japan.
The confidence in U.S. Belongings is returning now that the USA has eased its stance on trade and reached agreements, inclusive of one with China. So, what does that bode for Japanese belongings?
When you consider everything that has happened in the global macroeconomic environment, it was quite an exceptional month.
Most of the 8.21 trillion yen of internet inflows additionally befell inside the first week proper after April 2, consistent with the ministry’s statistics.
Following Trump’s “reciprocal” price lists announcement, the U.S. 10-year Treasury yield spiked with the aid of 30 basis points (April three to 9) while Japan’s 10-year yield fell by 21 basis points (April 2 to 8).
Even though Trump’s tariffs triggered a sell-off in worldwide stocks right away, Japan’s Nikkei 225 received more than 1% for the month, outperforming the S&P 500, which dropped by a bit under 1%.
Japanese assets are commonly taken into consideration as a haven, whose attraction rose because the “promote-U.S.” narrative gained ground in April, said Rashmi Garg, senior portfolio manager at Al Dhabi Capital.
The influx became, in large part, driven by institutional traders rather than retail buyers, said Nomura’s Goto. Pension price range and different asset managers probably offered equities aggressively, at the same time as Japanese bond purchases have been in large part driven with the aid of reserve managers, existence insurers, and also pension funds, in keeping with Nomura.
“It changed into a pretty great month, while you do not forget the whole thing that has occurred inside the global macroeconomic environment,” stated Kei Okamura, Neuberger Berman’s SVP and Japanese equities portfolio manager.
“That manifestly had an effect in the way international buyers had been considering the asset allocation toward the U.S … They needed to diversify,” he informed Expressepaper in a telephone call.
The road ahead
Abu Dhabi Capital’s Garg expects inflows to gradually down given the breakthrough in U.S.-China tariff talks, and also as deals with different international locations are likely. Britain, in truth, has become the first country to ink a cope with the U.S. Ultimate week.
While ancient month-to-month inflows won’t persist, marketplace watchers nonetheless have a positive outlook on Japanese assets and continue to see robust inflows.
Trump’s unprecedented movements and coverage flip-flops have dented U.S. Credibility and confidence in its property, and this could still bring about international fund managers investing much less in the U.S. Markets in favor of others, explained Vasu Menon, OCBC’s handling director of the funding strategy group.
“Given the sort of backdrop, call for Japanese property may additionally stay healthy even though it is not as strong as the April degree,” he stated. Japan’s ongoing talks with the U.S., Close to the tariff, have additionally raised some optimism over slicing the 24% “reciprocal” tariffs on Japan, Menon stated.
Japanese shares will also enjoy the Tokyo Stock Exchange’s corporate governance reforms, which have prioritized shareholder returns, Asset Management One International wrote in a notice.
The TSE’s corporate governance reforms, which kicked off in March 2023, warrant listed businesses whose shares change below a rate-to-book ratio of one to “comply or explain.” The initiative ambitions to enhance Japan Inc.’s enchantment to both overseas and domestic buyers.
According to Asset Management One International, this reform program has, in all likelihood, ended in tiers of percentage buybacks in Japan, boosting both profits in line with percentage and proportion fees. While the greenback has regained a little power following April’s sell-off, the potential for it to weaken further and the Japanese forex to strengthen “makes me feel” for investors to examine Japanese equities mainly as the economic system rebounds, stated Neuberger Berman’s Okamura.
“So this trend has legs. Japan will possibly keep to see correct flows,” Okamura stated.
Morningstar’s Makdad sees extra internet inflows into Japanese equities than in the past decade amid improved corporate governance.
Having stated that, he does not anticipate the identical significance of net inflows into short-term Japanese Treasury bills as he did whilst the Bank of Japan applied poor interest rates. This is due to the reality that the arbitrage opportunity for some overseas traders that existed at that point has been removed.