Foreigners make biggest weekly Japan bond purchases in more than a year

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TOKYO : Foreign investors bought the largest amount of Japanese government bonds in more than a year in the latest week as upward pressure on global yields eased amid signs that U.S inflation was moderating.

Data from Japan's Ministry of Finance show that foreign investors bought a net 2.2 trillion yen ($15.86 billion) of JGBs with maturities of more than one year in the week ended Nov. 19, the largest purchases since July 2021.

The buying spree followed a record 6.4 trillion yen sell-off in September as investors bet the Bank of Japan would alter its ultra-loose rate policy. Foreigners sold another 1.74 trillion yen of bonds in October.

"The absence of the Bank of Japan's policy meeting in November is one reason that investors bought back JGBs to cover short positions," said Takafumi Yamawaki, head of Japan rates research at J.P. Morgan Securities.

The BOJ remains an outlier among a global wave of monetary policy tightening to combat soaring inflation. Under YCC, or yield curve control, the BOJ guides short-term interest rates at -0.1 per cent and the 10-year bond yield around zero.

Upward pressure on global yields drove bets the BOJ would need to tweak or tighten policy, sending the 20-year JGB yield to a six-year high in October.

But the pressure eased after U.S. inflation cooled in October, supporting expectations the Federal Reserve could slow its tightening pace.

More recently, the U.S. Federal Reserve's November policy meeting minutes signalled a slower pace of future interest rate hikes.

The BOJ is scheduled to hold a two-day policy meeting on Dec. 19-20.

($1 = 138.7000 yen)

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