Proxies for Japanese pension funds bought a record amount of overseas bonds last month, adding to signs of robust demand for foreign debt even as local yields climbed.
Bank trust accounts bought a net ?3.16 trillion ($19.7 billion) in May, preliminary figures from the Finance Ministry showed on Monday. That was the highest in data going back to 2005.
¡°A large share of the flows likely went into the U.S.,¡± said Miki Den, a senior interest-rate strategist at SMBC Nikko Securities. ¡°With U.S. 10-year yields having risen at the time, the higher yields may have encouraged Japanese investors to buy foreign bonds.¡±
The benchmark U.S. Treasury bond yield climbed to 4.69% on May 19, the highest since January 2025, as rising oil prices fanned speculation that faster inflation would force the U.S. Federal Reserve to tighten policy. The similar-maturity Japanese yield also peaked in mid-May though it was still about 200 basis points below the U.S. levels.
Both yields have since remained elevated as hopes for a diplomatic resolution involving the U.S., Israel and Iran have faded.
¡°Purchases may slow in the near term amid heightened uncertainty,¡± said Den. ¡°But once investors have more clarity on the Middle East and the direction of Fed policy,¡± Japanese buying is likely to resume, he said.
With your current subscription plan you can comment on stories. However, before writing your first comment, please create a display name in the Profile section of your subscriber account page.