Feb 18 (Reuters) – Japanese domestic investors have been selling off foreign stocks and bonds heavily this year amid concerns over monetary tightening by major global central banks and its impact on global stock and bond markets.

Domestic investors have sold a total of 1.58 trillion yen ($13.72 billion) in foreign bonds and stocks this year, according to Japanese Finance Ministry data through the end of last week. .

They sold 385 billion yen in stocks and 1.2 trillion yen in bond markets, according to the data. The total sale of 1.58 trillion yen has already exceeded last year’s total sales of 1.5 trillion yen.

As major central banks shift into inflation-fighting mode and start raising ultra-low borrowing costs, the Bank of Japan (BOJ) is in no rush to follow suit.

Inflation in Japan remains far from the BOJ’s 2% target, its deputy governor Masazumi Wakatabe said earlier this month. Read more

“Due to the combined effect of rising global yields, Japanese government bonds (JGBs) now offer more attractive yields for local investors,” said Antoine Bouvet, senior rates strategist at ING, in a report.

“Combined with the risk of larger losses on US dollar and euro-denominated bonds, this could make JGBs an increasingly attractive alternative.”

Analysts also said currency hedging costs have risen for domestic investors, due to rising interest rates in foreign markets.

Another reason for the decline in Japanese investment in foreign stocks is the relatively larger decline in overseas markets. The Nikkei Index (.N225) has fallen 5% this year, compared to the MSCI World (.MIWD00000PUS) decline of 6%.

Last year, Japanese investors sold 3.61 trillion yen worth of US stocks but bought US bonds worth 6.85 trillion yen. At the same time, they sold stocks and bonds worth 538 billion yen and 1.76 trillion yen respectively in the European Union.

($1 = 115.1800 yen)

Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Vidya Ranganathan and Rashmi Aich

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