Japan: Banks’ large selling, other investors’ buying in April - Nomura

Analysts at Nomura points out that momentum in foreign portfolio investment by Japanese investors recovered in April, though banks were large net sellers of foreign bonds.

Key Quotes

“Excluding bank accounts, Japanese investors were net buyers of foreign securities at the highest pace since November 2016. There were broad-based net purchases by lifers, pension funds, and toshin companies. In March, large selling of French bonds by Japanese investors continued, but as political risks have declined Japanese foreign portfolio investment will remain strong for the next few months.”

“Japanese investors sold a net JPY3662bn ($33.3bn) in foreign securities (equities and intermediate and long-term bonds) in April. This was the fifth-straight month of net selling. Banks sold foreign securities aggressively, with JPY5454bn ($49.6bn) in net selling. Banks tend to be major net sellers in April (an average of JPY1199bn in net selling in 2005-16), and net selling by banks is unsurprising. The amount of banks’ net selling was the biggest since 2005 and surprised us, but the FX impact is limited, in our view.”

“Excluding bank accounts that carry out FX-neutral short-term trades, Japanese investors were net buyers of foreign securities to the tune of JPY1792bn ($16.3bn) (JPY728bn in net selling in the previous month). This is the biggest net buying since November 2016. A breakdown by assets (excluding bank accounts) shows that they were net buyers of foreign equities to the tune of JPY387bn ($3.5bn) (JPY1134bn in net selling in the previous month), and net buyers of foreign bonds to the tune of JPY1405bn ($12.8bn) (JPY407bn in net buying in the previous month).”