Foreign Buyers Flock to JGBs as BOJ Hike Expectations Rise

Foreign investors have been drawn to Japanese government bonds (JGBs) for the third consecutive week, driven by rising domestic yields and expectations of a Bank of Japan interest rate hike.

Data from Japan's Ministry of Finance shows that foreign investors made a net purchase of ¥449.6 billion in long-term JGBs between September 1 and 5, while selling a net ¥275.2 billion of short-term bills.

The 10-year JGB yield rose to 3.015% last week, its highest since September 1996, fuelling speculation that Japanese investors may redirect capital back home.

Hawkish comments from BOJ board member Hajime Takata and US support for Japan taking 'decisive' monetary action to address inflation and yen weakness boosted rate-hike expectations, pushing the yen to a near seven-month high of 152.87 per dollar on Tuesday.