Foreign investors poured a record amount of capital into Japan’s longest-dated government bonds in March, as concerns about a potential U.S. recession fueled by President Donald Trump’s escalating tariffs led many to seek alternative safe-haven assets.
According to data released by the Japan Securities Dealers Association, international investors purchased a staggering 2.18 trillion yen ($15.49 billion) worth of Japanese government bonds (JGBs) with maturities longer than 10 years. This marks the largest foreign demand for such bonds since the data series began in April 2004.
The surge in demand came as President Trump implemented a series of aggressive tariffs, including a 25% levy on cars and parts, throughout March. These tariffs, which culminated in Trump’s announcement on April 2 of sweeping duties, created significant uncertainty in global markets and stoked fears of a U.S. recession.
Simultaneously, local Japanese insurers sold off a record 645.8 billion yen of super-long JGBs in response to portfolio adjustments at the close of Japan’s fiscal year. Shoki Omori, chief desk strategist at Mizuho Securities, noted that the shift in the bond market was influenced by both international and domestic factors.
The relative uncertainty surrounding future interest rate hikes by the Bank of Japan, due to the unpredictable global trade environment, also played a role in making JGBs more attractive to foreign investors. As Omori explained, the market’s diminished expectations for rate increases provided an opportune moment for overseas capital to flow into Japan’s government bonds.
The volatility surrounding JGB yields further reflected these market dynamics. On Monday, the 30-year JGB yield stood at 2.76%, after experiencing sharp fluctuations over the past month. The yield hit a low of 2.195% on April 7, a level not seen since October, before soaring to a two-decade high of 2.845% a week later. Throughout March, the yield climbed 17 basis points to reach 2.52%, peaking at 2.63% mid-month before retreating as market volatility intensified.
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