Foreign investors are not letting Japan’s rough trot upset them, or the fear of a credit rating downgrade worry them; they are continuing to load up on Japanese securities, according to figures released yesterday.
Monthly Finance Ministry data released yesterday showed overseas investors were net buyers of Japanese stocks in May for the eighth straight month.
They purchased a net 38.8 billion yen worth of Japanese stocks (around $455 million), with purchases at 15.39 trillion yen and sales of 15.36 trillion yen.
Foreigners were net sellers of Japanese stocks in late May amid concerns over a possible US economic slowdown and Europe’s debt crisis, but this was offset by net purchases of Japanese stocks in the first couple of weeks.
Overseas investors were also net buyers of medium- and long-term Japanese government bonds for the fifth straight month.
They bought a net 2.67 trillion yen of such bonds, the third highest value on record. Buys reached 8.52 trillion yen, while sells came in at 5.84 trillion yen.
Lower interest rates seem to have prompted overseas investors to review investment portfolios and shift money from short-term to long-term bonds.
Foreigners purchased a net 904 billion yen of short-term government bonds (more than $10.5 billion), with purchases totalling 12.46 trillion yen and sales reaching 11.56 trillion yen.
At the same time the International Monetary Fund yesterday raised its forecast of economic growth in Japan for 2012 to 2.9% from an earlier projected 2.1%, expecting a recovery from the March earthquake and tsunami.
The news came as the Finance Ministry also released details of Japan’s current account for April which showed a 69.5% fall brought on by the slump in exports in the month in the wake of the March 11 disasters.
Japan’s current-account surplus narrowed to 405.6 billion yen ($4.7 billion) in the month, nearly double the market forecast of 217.1 billion yen.
As reported last month in the trade surplus report, exports fell while imports rose.
The current account data said exports for the month fell 12.7% (12.5% on a trade basis) from the year-earlier period, while imports rose 12.3% (8.9% on a trade basis).
The trade and services balance fell into the red for the first time in three months, logging a deficit of 838.8 billion yen. The trade deficit came at 417.5 billion yen and the services deficit was 421.3 billion yen.
But a 35% jump in the income surplus to a massive 1.3308 trillion yen pushed the current account into the higher than forecast surplus.
Japan fell into a trade deficit in April as exports tumbled at the fastest pace in 18 months on supply chain disruptions after the March 11 earthquake and tsunami, official data showed Wednesday.
It is the first time in 31 years that the world’s third largest economy has suffered a trade deficit for the month of April, according to the finance ministry.
Japan logged a deficit of 463.7 billion yen ($5.6 billion) last month, reversing a year-before surplus of 729.2 billion yen.
And there was an easy explanation for that: Japan’s massive foreign reserves and holding of offshore assets.
The latter are estimated at around $US2.5 trillion, while figures out Tuesday showed that the country’s foreign reserves hit an all time high last month of $US1.139 trillion, from $US1.136 trillion at the end of April.
It was the third month on month increase and came off the back of the fall in US Government bond yields (which boosts prices).
Japan’s foreign exchange reserves consist of securities and deposits denominated in foreign currencies, International Monetary Fund reserves, IMF special drawing rights (SDRs) and gold, and are the second largest in the world after China’s.
And finally more evidence of the turnaround appearing in the Japanese economy with a key Japanese economic index rising in April, after a record monthly drop in March due to the huge earthquake and tsunami.
The Cabinet Office says the April coincident index was up from 103.5 in March to 103.8, against 100 for the base year of 2005. The increase is the first in two months.
Improved indicators for corporate production and consumer spending are attributed to gradual recovery of industrial supply chains and improved consumer sentiment.
The index of leading indicators, which projects the state of the economy several months ahead, fell 3.7 points due to disrupted car shipment schedules.
