In February 2025, Japanese investors net purchased JPY3.0trn ($19.5bn) of foreign securities (equities + long-term bonds), the largest net purchase since August 2024 (Fig. 2 ). The main contributor was net purchases of foreign bonds by pension funds and banks (Fig. 3 ).
Banks net bought foreign bonds amid weak US data Japanese banks net purchased JPY1.1trn ($7.0bn) of foreign bonds in February (Fig. 3 ). Weaker-than-expected US data, such as retail sales and PMI for February, might have encouraged them to buy US Treasurys. It may have led to the decline in long-term US Treasury yields during February.
Trust accounts (pension funds) net purchased JPY1.5trn ($10.0bn) of foreign bonds in February, the largest net purchase since August 2024 (Fig. 4 ). The yen’s appreciation and elevated EGB long-term bonds yields seem to have encouraged them to buy foreign bonds for rebalancing their portfolio allocations. By contrast, they net sold JPY744bn ($4.9bn) of foreign equities, marking net selling of foreign equities for six consecutive months.
These are final monthly international securities flow data before the GPIF’s new medium- term strategy from April 2025 to March 2030, which is scheduled to be released around end-March. While it may look a bit strange for them to have sold foreign equities in February, despite the decline in yen-denominated global stock prices, pension funds so far seem to have been focused on rebalancing their portfolio allocations, showing no clear signs of changing their portfolios markedly ahead of the GPIF’s new basic portfolio from April 2025. Indeed, our estimate of the GPIF’s portfolio as of end-February remains largely in line with its current basic portfolio (Fig. 5 ; an equal 25% allocation to each asset type). Although the ratio of domestic bonds is a bit higher than 25%, if we exclude the reserves that the GPIF manages in its special pension account from its total asset holdings, which were JPY1.7trn as of end-December, the share of all asset classes becomes closer to 25%. These data support our view that the GPIF is unlikely to change its portfolio allocations significantly from April 2025.
Ahead of the GPIF’s official announcement of its new basic portfolio likely around end- March, we should closely monitor pension funds’ flow data of domestic bonds for February, which are scheduled to be released by the JSDA around 20 March.
