Why have foreign investors escalated Japanese stock trades?

The turmoil triggered by the Bank of Japan’s recent interest rate hike has produced two more entries for the record book: All time highs for both inflows and outflows in the nation’s stocks last week. Global investors were net buyers of Japanese stocks in the week ending Aug. 9 as trading recovered from an historic rout. Gross sales totaled ¥31.3 trillion ($210 billion), the most since at least 2005, preliminary data from the Ministry of Finance showed. Gross purchases were ¥31.9 trillion, also a record over the same period, making them net buyers.  Separate data from Japan Exchange Group Inc. later showed that including futures, foreign investors were net sellers, offloading ¥777.2 billion, while domestic institutions bought the most since March 2023. The Nikkei 225 Stock Average slumped 12% on Aug. 5, the biggest percentage fall since Black Monday in 1987, before rebounding 10% the next day. The data underscores overseas investors’ strong appetite for Japanese equities even after the unwinding of yen-funded carry trades sent shock waves through broader markets. Bruce Kirk, chief Japan equity strategist at Goldman Sachs Group Inc., said foreign investors are looking to buy Japanese stocks. The Nikkei jumped 8.7% this week, its steepest advance since April 2020.