Foreign Investors Dump $24 Billion Of Japanese Debt In Two Weeks
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Overseas investors in the Japanese government bond market have sold more than 2 trillion yen ($24 billion) in bonds over the last two weeks, claimed the Wall Street Journal on Wednesday, as concerns continue to grow over Japan’s national debt level.
Overseas investors in the Japanese government bond market have sold more than 2 trillion yen ($24 billion) in bonds over the last two weeks, claimed the Wall Street Journal on Wednesday, as concerns continue to grow over Japan’s national debt level.
According to net sale figures from the Japanese Ministry of Finance, foreign investors sold 1.14 trillion yen ($13.8 billion) of Japanese bonds in the week ended March 24, coming just after 1.04 trillion yen ($12.66 billion) had been sold the week before.
The WSJ added that such large-scale debt unloading had not been seen in Japan ever since the Lehman Brothers shock of 2008, which subsequently prompted the global financial crisis.
[quote]”Some foreign investors might have unwound their JGB (Japanese Government Bonds) positions, partly due to the weak yen as well as other technical factors,” said Tadashi Matsukawa, a fixed-income investment manager at PineBridge Investment.[/quote]Related: Japan Economy
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Other analysts also suspect that an improving US economic outlook may have prompted some investors to move their funds across the Pacific.
“JGBs were sold in the past weeks amid increasing expectations for yield rises in global bond markets,” said Akito Fukunaga, chiefrates strategist at RBS Securities in Tokyo.
Nevertheless, the scale of the bond sale in such a short time period has still managed to refocus public attention on the national debt level, which at more than 200 percent of the national GDP, is even higher than that of Greece when it had to accept an international bailout.
“I think we are in an extremely precarious situation,” said Hirohisa Fujii, tax chief of the ruling Democratic Party during a recent interview cited by WSJ. The national debt level could rise even further by this Sunday when the government announces that they will use debt, through bonds, to fund half of the national budget for the upcoming fiscal year.
Still, the heavy selling done by foreigners do not appear to have had an effect on the nation’s bond yield and foreign-exchange market. Yields for the benchmark 10-year bond fell below 1.0 percent on Thursday, down from 1.02 percent on March 23. It stood at 0.99 percent on March 9, before the large selling over two weeks, and at 0.97 percent on Feb. 24. The Japanese yen was also at 82.35 yen against the US dollar at the end of last week, which was virtually unchanged compared to before the bond sale.
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Some analysts therefore have theorised that the heavy selling on the part of foreigners could have already been absorbed by domestic buyers, who are less sensitive to government-borrowing concerns.
[quote]”From this context, we need to see more data to judge whether foreigners will keep selling JGBs,” said Teruyoshi Sotome, a bond strategist at Mizuho Securities.[/quote]
