Japanese buying of bonds denominated in U.S. dollars and euros reached a four-month high in November as unprecedented easing by the nation’s central bank drove investors overseas.
Fund managers in the Asian nation bought a net 1.48 trillion yen ($14.3 billion) of dollar debt and 972.9 billion yen of euro notes, the biggest acquisitions among currencies tracked in Ministry of Finance data released today. Investors purchased more Australian-dollar bonds than they sold for a second straight month, breaking an 11-month stretch of sales.
The yen dropped 17 percent last year in its biggest decline since 1979, according to Bloomberg Correlation Weighted Indexes which track 10 major currencies, as central bank Governor Haruhiko Kuroda held down local yields and revived inflation, spurring Japanese investors to seek the higher returns available overseas. The buying has stalled in December and January with 513 billion yen in debt sales recorded over five weeks, according to weekly data that isn’t broken up by country.
“Yen weakness has become a trend, and that’s probably why domestic investors have gone abroad once again,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd., which has the equivalent of $341 billion in assets. “Japanese yields won’t rise considering the amount of debt that the BOJ is buying.”
The BOJ maintained a pledge to expand the nation’s monetary base by an annual 60 trillion yen to 70 trillion yen at a meeting last month. Policy makers doubled monthly bond purchases in April to more than 7 trillion yen to end deflation.
The current account deficit increased to 592.8 billion yen in November, the largest monthly shortfall in data going back to 1985, according to the Ministry of Finance report. That exceeds a median forecast of 368.9 billion yen in a Bloomberg News survey of economists.
The yen fell 0.5 percent to 103.45 per dollar as of 11:40 a.m. in Tokyo after touching five-year low of 105.44 on Jan. 2. It declined 0.4 percent to 141.32 yen against the euro, paring this year’s advance to 2.4 percent. It was at 93.39 per Aussie.