Demand for Japanese Bonds Surges Amidst Global Uncertainty
The demand for Japanese bonds surged to a two-year high in the week ending March 15, 2013. This surge was driven by the safe-haven appeal of Japanese bonds due to growing concerns over the potential economic impact of changes in U.S. tariff policies and a broad selloff in equities.
Foreign investors were particularly active in the Japanese bond market, purchasing a net 3.4 trillion yen ($22.82 billion) worth of long-term Japanese bonds. This marked the largest weekly net purchase by foreign investors in two years.
However, short-term Japanese bonds witnessed outflows of 2.26 trillion yen, the biggest weekly net foreign sales in nearly seven months. This suggests that investors were seeking the safety of longer-term bonds while remaining cautious about the short-term economic outlook.
Foreign investors also pulled out 1.81 trillion yen from Japanese equities, the highest in a week since September 21. This further highlights the risk-averse sentiment among investors during this period.
Japanese investors, meanwhile, divested foreign equities worth a net 752.5 billion yen following four consecutive weekly net purchases. This suggests that Japanese investors were also seeking safe havens for their investments.
They also sold 87.6 billion yen worth of foreign long-term debt securities, but snapped up about 128.7 billion yen worth of short-term bills. This indicates that Japanese investors were seeking short-term liquidity while remaining cautious about the long-term economic outlook.