Bond Surge: The Safe Haven Appeal of Japanese Bonds

Japanese bonds experienced a significant surge in demand due to concerns over changes in U.S. tariff policies, resulting in a two-year high. Foreign investors broadly purchased long-term Japanese bonds, while pulling funds out of short-term bonds and equities. Japanese investors also divested foreign assets.

In a notable shift, Japanese bonds saw a significant rise in demand, attaining a two-year high as uncertainty surrounding U.S. tariff policies sparked safe-haven buying. Data from Japan's Ministry of Finance showed foreign investors purchased long-term bonds worth 3.4 trillion yen, marking the highest weekly net purchase in two years.

Conversely, short-term Japanese bonds faced outflows of 2.26 trillion yen, the largest weekly net sales in nearly seven months. Additionally, foreign investors withdrew 1.81 trillion yen from Japanese equities, a peak not seen since September 21.

Simultaneously, Japanese investors reduced their holdings in foreign equities by 752.5 billion yen after four weeks of net purchases. They also decreased investments in foreign long-term debt securities but increased their acquisition of short-term bills by 128.7 billion yen.

(With inputs from agencies.)