As Trump ignites a new round of tariff wars causing global market turmoil, more and more international investors are shifting their focus from the United States to the Japanese stock market, seeking more stable and growth-potential investment targets. Over the past eight weeks, foreign investors have been net buyers of Japanese equity stocks, marking the longest consecutive buying streak since June 2023, indicating a reassessment of the Japanese market by global investors.
Data shows that for the week ending May 23rd, foreign investors purchased Japanese stocks worth 285 billion yen (approximately 2 billion USD). Since Trump's announcement of "global reciprocal tariffs" in April, foreign capital's cumulative net purchases have reached 2.86 trillion yen, reflecting the rapid movement of funds away from the US towards more promising Asian markets.
Nomura Securities strategist Maki Sawada noted that the advancement of corporate governance reforms in Japan is one of the key factors attracting foreign investment. Under the dual pressure from the Tokyo Stock Exchange and activist shareholders, Japanese companies are taking steps to enhance shareholder returns. So far, several companies have launched record-breaking stock buyback plans this year, seen as a strong signal of improved capital allocation policies.
"Japanese companies are becoming more focused on investor interests, and the market is very sensitive to this," Sawada commented.
Besides corporate-level reforms, the relatively stable macroeconomic environment in Japan is another significant reason for foreign capital's preference. In contrast, the US economy faces increasing uncertainty under tariff policy impacts, and concerns about recession are growing. Meanwhile, Japan is stimulating domestic consumption potential through moderate inflation and concurrently rising wages.
"Investors are beginning to see signs of rising domestic demand in Japan, and the potential for a future rate hike by the Bank of Japan has also raised its appeal," Sawada further added.
Moreover, progress on the geopolitical front is also benefiting the market. This week, Japan's chief trade negotiator Akira Amari is heading to Washington for the fourth round of negotiations with the US. The market expects that if Japan and the US can reach a consensus on tariff issues, it could further positively impact the Japanese market.
Collectively, Japan is emerging as a "safe haven" amid global instability. The sustained buying by foreign investors reflects not only short-term risk aversion but also a reassessment of Japan's medium to long-term investment value by investors.
