TOKYO (Reuters) – Foreign investors made hefty investments in Japanese stocks in 2023, buoyed by optimism around corporate governance reforms and a weaker yen against the dollar.
Japanese stocks accumulated about 6.3 trillion yen ($43.39 billion) worth of foreign inflows on a net basis last year, the biggest amount since at least 2014, according to data from the country's stock exchanges.
Overseas investors secured about 3.12tr yen worth of cash equities and a net 3.17tr yen worth of derivatives last year, breaking a three-year-long selling streak.
The Nikkei share average reached a new 34-year high of 35,839.65 on Friday, fuelled by fading expectations of early withdrawal from stimulus by the Bank of Japan and consistent strong purchasing by foreign investors. The index had gained 28.2pc last year.
Bank of America highlighted similarities between this year and last year's rally.
"One factor that sparked last year's rally was the highest Shunto wage hike in 30 years. With one large company after another announcing large wage increases over the last few weeks, this year's Shunto looks increasingly likely to be even higher." the brokerage said in a note on Thursday.
However, in the first week of 2024, which was shortened by holidays, overseas investors withdrew about 112.01bn yen from Japanese stocks on a net basis.
Concurrently, they invested a staggering 5.35tr yen in short-term Japanese bonds last week, marking the most significant weekly net purchase since Dec 9, 2022. Meanwhile, long-term Japanese bonds saw foreign outflows totalling approximately 402.7bn yen.
In contrast, Japanese investors were active in overseas markets, purchasing 190.7bn yen in foreign equities, continuing a trend of net buying for the second consecutive week.
Additionally, they invested 542.3bn yen in long-term overseas bonds while offloading about 83.2bn yen in short-term foreign debt securities.