July 3 (Reuters) - Foreign investment in Japanese equities appears to have picked up recently, and reports suggest most of these inflows to stocks and even bonds are going unhedged, deviating from past practice. Expectations of yen strength may explain the shift.
Foreign investors bought a net 651.3 billion yen of Japanese stocks and 1.0526 trillion yen of Japanese government bonds in the week ended June 28, reversing sales from the previous week , .
The view in Tokyo is that most of these fresh investments in Japanese assets are going unhedged. This is surprising to many who have seen such flows typically accompanied by currency hedges - that is, sales of the yen and buying of U.S. dollars or whichever currency the flows originated from.
Expectations of a stronger yen over time may explain this lack of currency hedging. This stance is in stark contrast to foreign investor thinking on USD-denominated stocks, bonds and other assets. To wit, such investments are being hedged aggressively , a trend that may still be in its infancy.
Investors and traders will continue to buy U.S. assets but, apart from those with very short investment horizons, such flows will likely be hedged aggressively and add to downward pressure on the U.S. dollar going forward.
For more click on
Foreign flows into Japanese stocks: https://reut.rs/3SQDye4 [https://reut.rs/3SQDye4]
Foreign flows into Japanese debt securities: https://tmsnrt.rs/3nsVz5d [https://tmsnrt.rs/3nsVz5d]
USD/JPY: https://tmsnrt.rs/4lAuLc4 [https://tmsnrt.rs/4lAuLc4]
(Haruya Ida is a Reuters market analyst. The views expressed are his own. Editing by Sonali Desai)
((haruya.ida@thomsonreuters.com [haruya.ida@thomsonreuters.com];))
