Foreign Investors Flee Japanese Stocks Amid Yen Strength and BOJ Policy Jitters

Foreign investors turned net sellers of Japanese stocks in early August, marking one of the largest weekly reversals in recent months. In the week ending August 7, they recorded a net outflow of ¥368.5 billion after a ¥392.5 billion inflow the prior week.

The shift is attributed to a combination of factors, including a firmer yen and rising expectations that the Bank of Japan may adjust its yield curve control policy. This could impact equity valuations, prompting investors to take profits or hedge against near-term uncertainties.

Japanese equities have been a standout performer over the past year, supported by corporate governance reforms, a weak yen, and foreign buying. However, this latest outflow suggests that some international investors are taking a more cautious approach.