Proxies for Japanese pension funds bought a record amount of overseas bonds last month, adding to signs of robust demand for foreign debt even as local yields climbed.
Bank trust accounts bought a net ?3.16 trillion ($19.7 billion) in May, preliminary figures from the Finance Ministry showed on Monday. That was the highest in data going back to 2005.
“A large share of the flows likely went into the U.S.,” said Miki Den, a senior interest-rate strategist at SMBC Nikko Securities. “With U.S. 10-year yields having risen at the time, the higher yields may have encouraged Japanese investors to buy foreign bonds.”
The benchmark U.S. Treasury bond yield climbed to 4.69% on May 19, the highest since January 2025, as rising oil prices fanned speculation that faster inflation would force the U.S. Federal Reserve to tighten policy. The similar-maturity Japanese yield also peaked in mid-May though it was still about 200 basis points below the U.S. levels.
Both yields have since remained elevated as hopes for a diplomatic resolution involving the U.S., Israel and Iran have faded.
“Purchases may slow in the near term amid heightened uncertainty,” said Den. “But once investors have more clarity on the Middle East and the direction of Fed policy,” Japanese buying is likely to resume, he said.
With your current subscription plan you can comment on stories. However, before writing your first comment, please create a display name in the Profile section of your subscriber account page.