In November 2024, Japanese investors continued pulling back from overseas equities, marking a second consecutive month of net selling. This trend, reflecting heightened risk aversion, highlights investors’ growing concerns over geopolitical risks and fluctuating interest rates affecting global market stability.

Key Highlights of Selling Activity

• Net Outflows: Japanese investors divested approximately ¥1.1 trillion ($7.4 billion) in foreign equities, following a ¥1.2 trillion sell-off in October.
• Shift to Domestic Bonds: With equities losing attractiveness, there has been a noticeable increase in domestic bond purchases as a safer investment.

Driving Factors Behind the Trend

1. U.S. Market Volatility: Ongoing uncertainties regarding the U.S. Federal Reserve’s interest rate decisions are dampening investor confidence.
2. Geopolitical Risks: Conflicts and instability in various regions are raising concerns about the resilience of global equity markets.
3. Stronger Yen: A stable yen diminishes the attractiveness of foreign assets, limiting perceived returns from international investments.

Market Implications

The ongoing retreat by Japanese investors could signal weaker demand for overseas equities, potentially amplifying market volatility. Meanwhile, increased investments in domestic bonds could support Japan’s financial market, enhancing liquidity in local debt assets.