Foreign Investors Trim Japanese Equity Holdings Amid Tech Sector Concerns

Overseas investors sold Japanese equities for a second consecutive week through June 6, as concerns over elevated technology stock valuations and broader global market uncertainties prompted profit-taking. The latest outflows came after weaker-than-expected earnings from Broadcom raised questions about the sustainability of the technology-driven rally that has fuelled gains in global markets.

Investor sentiment was also affected by a stronger-than-expected United States jobs report, which reinforced expectations that the Federal Reserve could maintain higher interest rates for longer. At the same time, escalating tensions in the Middle East added to market caution.

Foreign Selling Accelerates

According to data from Japan’s Ministry of Finance, foreign investors sold a net 701 billion yen worth of Japanese equities during the week ending June 6. The figure marked a notable increase from net sales of 491.5 billion yen recorded in the previous week.

The selling pressure coincided with a pullback in Japanese equities after a strong run earlier in the year. The benchmark Nikkei index has declined approximately 7.3% from its recent record high of 68,786.49 reached last week.

Despite the recent outflows, foreign investors remain significant buyers of Japanese stocks in 2026. Net purchases have reached roughly 10.63 trillion yen so far this year, far exceeding the approximately 1.26 trillion yen invested during the same period a year earlier.

Bond Market Sees Foreign Outflows

Foreign investors also reduced their exposure to Japanese government debt. They sold a net 1.04 trillion yen of long-term Japanese bonds during the week, bringing an end to a two-week period of net purchases.

The move suggests investors are reassessing positions across both equity and fixed-income markets amid uncertainty surrounding global monetary policy and geopolitical developments.

Japanese Investors Continue Overseas Equity Sales

Meanwhile, Japanese investors extended their recent retreat from overseas stock markets. They sold a net 943.6 billion yen of foreign equities, marking a third consecutive week of net outflows.

The continued selling indicates a cautious approach towards international equity markets, particularly as investors evaluate interest rate expectations and global economic conditions.

However, Japanese investors maintained demand for foreign debt instruments. They purchased 42.3 billion yen in foreign short-term bills and added 197.5 billion yen of overseas long-term bonds during the week.

These purchases represented the fifth weekly net acquisition of foreign bonds in the past six weeks, highlighting continued interest in international fixed-income assets despite reduced appetite for overseas equities.

The latest capital flow data underscores a more cautious investment environment as market participants balance strong year-to-date gains against concerns over technology valuations, interest rate policy and geopolitical risks.

With inputs from Reuters