The “Japanese Whale” hit the pause button in December.
According to new Ministry of Finance data, Japanese investors turned net sellers of foreign assets last month, reversing a year-long trend of aggressive accumulation.
📉 THE DECEMBER PULLBACK:
- Bonds: Net selling of ¥374.2 billion (reversing Nov’s ¥718.9B inflow).
- Equities: Net selling of ¥350.4 billion (profit-taking on elevated valuations).
- Key Sellers: Life Insurers led the exodus, dumping ¥254.3 billion in long-term bonds—the most since March.
🌊 THE 2025 MACRO VIEW: Despite the year-end dip, 2025 was a blockbuster year for capital export.
- Bond Inflows: ¥13.59 trillion (Over a 3x increase vs. 2024).
- Equity Inflows: ¥1.71 trillion (Snapping two consecutive years of net selling).
- Destination: The flows were heavily concentrated in US Treasuries (¥10.6T) and European Debt (¥2.74T), while investors specifically dumped British Bonds in November on fiscal concerns.
💡 ANALYST TAKEAWAY: The December selling appears to be tactical year-end rebalancing rather than a structural shift. With the Fed signaling “restrictive for longer” despite recent cuts, Japanese LifeCos are likely locking in gains from the 2025 rally. However, the sheer volume of 2025 inflows (¥13.6T) confirms that the Carry Trade is back in full force, provided the BoJ maintains its dovish stance relative to the Fed.
👇 Rates Traders: If Japanese insurers resume buying in Q1, does this put a hard ceiling on the 10-Year Treasury yield?