Foreign investors poured a record 2.48 trillion yen ($16.26 billion) into Japanese equities during the week ending October 4, according to Japan’s Ministry of Finance. This marks the largest weekly inflow since at least January 2005, as markets reacted to expectations surrounding the Liberal Democratic Party’s leadership election.
The surge came as Sanae Takaichi, known for her fiscally dovish stance and support for expansionary stimulus policies, emerged as the party’s new leader and Japan’s next prime minister.
Market Impact
Japanese equities soared following Takaichi’s victory. The Nikkei 225 index rose 4.75%, while the Topix Index gained 3.1%, both hitting fresh record highs amid optimism for increased government spending and monetary easing.
In addition to equities, foreigners bought a net 1.26 trillion yen in long-term Japanese bonds and 847.7 billion yen in short-term bills, partially offsetting earlier outflows.
Why It Matters
The record inflows signal renewed global confidence in Japan’s economic outlook and expectations that stimulus-driven growth will continue under Takaichi’s leadership. The move also underscores how foreign sentiment can rapidly shift, as the latest inflows followed three consecutive weeks of outflows totaling 4.74 trillion yen.
Meanwhile, Japanese investors have taken the opposite direction continuing to sell foreign assets for a third straight week, including 1.45 trillion yen in equities and nearly 1 trillion yen in long-term bonds.
What’s Next
Markets will now watch for Takaichi’s economic policy signals, particularly regarding fiscal stimulus, interest rates, and coordination with the Bank of Japan. Sustained foreign interest will depend on whether her government maintains growth-focused policies without triggering inflation or fiscal imbalances.
($1 = 152.53 yen)
With information from Reuters.
AloJapan.com