The World’s Biggest Bond Buyer Is Quietly Walking Away
At a Glance:
- Japanese investors sold ¥3 trillion ($18.7B) in overseas debt this year – the biggest outflow since 2022
- 10-year Japanese government bond yield hit 3% for the first time since 1996
- Corporate pension funds show the strongest appetite for domestic bonds since 2008
- Japan remains the top foreign holder of U.S. Treasuries, but the buying has slowed to a crawl
After decades of chasing higher returns abroad, Japan’s biggest investors are starting to look homeward, and the shift is rattling bond markets from Sydney to New York.
For years, Japanese money helped keep global borrowing costs low. That era may be ending. As domestic yields climb past a threshold untouched since 1996, the world’s largest pool of savings is quietly pulling back from foreign debt.
Key Details
Japanese investors have offloaded a net ¥3 trillion in overseas bonds so far this year, the sharpest pullback since 2022. A new J.P. Morgan survey of 82 corporate pension funds found the strongest interest in domestic bonds since the poll started in 2008.
Market Reaction
Fund managers in Tokyo, Sydney, and London say the pullback is already visible. Lazard’s Michael Weidner says Japanese clients are “reallocating” after 25 years of being underweight in yen assets. In Australia, once a favorite destination for Japanese cash, buying has cooled to simply holding steady.
Why It Matters
Japan holds $2.4 trillion in foreign bonds. Even a modest slowdown in that buying reduces demand for Treasuries and other sovereign debt, pushing global yields higher.
What to Watch
The Bank of Japan meets later this month, with markets betting on a rate hike. A stabilizing yen could accelerate the homeward shift even further.
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Source: Reuters
