US Rate Hike Fears Spur Big Japanese Selloff of Foreign Stocks

A man is silhouetted as he walks in front of a monitor displaying the Japanese yen exchange rate against the US dollar and Nikkei share average in Tokyo. Japanese investors have been dumping equities and buying up bonds. Reuters file image.

Japanese investors were big sellers of overseas stocks in February, data from the Ministry of Finance has revealed.

The sell-off came amid big declines in global equities because of concern about further rate hikes by the US Federal Reserve, which is battling to curb sticky inflation.

Ministry of Finance data showed that investors sold a net 2.15 trillion yen ($15.62 billion) in foreign equities in February, their biggest monthly net selling since a 2.8-trillion yen selloff in April 2021.

By investor type, trust accounts accounted for most of the selling, disposing 1.4 trillion yen worth of foreign equities, while banks and life insurers sold 0.1 trillion yen and 0.2 trillion yen respectively.

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Buying up US, Euro bonds

Last month, data showed US consumer inflation rose higher than expected in January, while its job growth accelerated.

Meanwhile, Japanese investors purchased a net 4.14 trillion yen worth of overseas bonds in a second straight month of net buying last month.

Investors had purchased a net 677.81 billion yen worth of US and 713.78 billion yen worth of European bonds in January, data from Bank of Japan showed.

“Although this indicates that the aggressive net selling of foreign bonds that started last year may have taken a breather, investment in those bonds could be suppressed again toward the end of the fiscal year as the market monitors the possibility of the Fed reconsidering the pace of its rate hikes in response to recently strong US data,” Barclays said in a note on Wednesday.

Ispace plans IPO

In related news, Japan’s ispace Inc, aiming to be the first commercial company to land a probe on the moon, announced on Wednesday an initial public offering of its shares.

The start-up will list 200 million shares on the Tokyo Stock Exchange’s growth section on April 12, according to a release from the exchange, which lists the company’s business as lunar development and transportation services.

In December the company launched its HAKUTO-R Mission 1 lunar lander aboard a SpaceX rocket which took off Cape Canaveral, Florida, carrying two robotic rovers.

Tokyo-based ispace gave a mission update last month, saying the probe had reached its furthest distance from Earth and was due to touch down on the moon’s surface in late April.

The company has a contract with NASA to ferry payloads to the moon from 2025 and is aiming to build a permanently staffed lunar colony by 2040.