JAPAN DATA: Domestic Outflows Modest So Far in 2026, Offshore Inflows Continue
Local investors maintained a relatively modest start to 2026 in terms of offshore asset purchases. There was a modest pick up in buying of overseas bonds, but this followed some net selling in the prior two weeks. Cumulative flows in recent months remain negative. Global bond returns have been fairly flat since the start of the year, continuing a trend seen for much of Q4 last year. Local investors also purchased offshore stocks, but in very modest size. The bias in recent months for flows in this space remains negative.
- In contrast, overseas interest in Japan assets was notably stronger (see the table below). Offshore interest in local equities was a key feature of the 2025 flow backdrop (particularly since April of last year) and solid Japan equity gains since the start of the year is likely fueling on-going interest.
- Net inflows have also been evident into Japan debt. Since Oct last year we have seen cumulative net inflows of around ¥5trln. Is the yield rise in Japan attracting greater offshore inflows into this space?
Table 1: Japan Weekly Offshore Investment Flows
| Billion Yen | Week ending Jan 9 | Prior Week |
| Foreign Buying Japan Stocks | 1141.4 | 124.9 |
| Foreign Buying Japan Bonds | 1007.8 | 273.5 |
| Japan Buying Foreign Bonds | 101.1 | -223.6 |
| Japan Buying Foreign Stocks | 27.5 | 236.6 |
Source: Bloomberg Finance L.P./MNI
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JAPAN DATA: Export Pick Up Consistent With Broader Asia Trends, Aided By Chips
Japan Nov trade data was slightly better than forecast. Exports rose 6.1%y/y (5.0% projected and 3.6% prior), while imports were +1.3%y/y (against a 3.0% forecast). This saw the trade surplus print at ¥322.3bn, against a ¥72.6bn forecast and -¥226.1bn prior outcome. In seasonally adjusted terms the surplus was ¥62.9bn, also well above market forecasts. The pick up in export growth will be welcome by the authorities/BOJ, with concerns earlier in the year higher US tariff levels would weigh on external demand.
- The improvement in Japan export growth is consistent with other export orientated Asian economies, with growth ticking up into year end. Taiwan remains the standout though.
- Japan exports were firmer to the US, up 8.8%y/y (from -3.1%y/y prior), while to the EU posted a 19.6%y/y rise (exports to China fell 2.4%y/y). Automobile exports to the U.S. increased 1.5%, rebounding from a 7.5% decline in October. Aggregate chip exports were firm at 13%, after a 15.8% rise in Oct.
- In volume terms exports to the US were up 14%y/y, to the EU 16%y/y, but negative to China and Asia.
AUSSIE BONDS: ACGB Oct-36 Auction Prints Below Mids With Solid Demand
Today’s auction result extended the recent trend of firm pricing for ACGBs, with the weighted average yield printing 0.33bp through prevailing mids, according to Yieldbroker. Moreover, demand was robust, as reflected by a cover ratio of 3.7100x.
- The strong demand came with the bond’s outright yield around a fresh cycle high, ~40bps higher than the syndicated issuance level.
- However, the 3/10 yield curve was around its flattest level since March, approximately 25bps flatter than at the time of its syndicated sale.
- The improvement in sentiment toward longer-dated global bonds looks to have assisted demand.
- In the wake of the auction, the ACGB Oct-36 is little changed.
AUSSIE BONDS: ACGB Oct-36 Auction Results
The AOFM sells A$1000mn of the 4.25% 21 October 2036 Treasury Bond, #TB173:
- Average Yield (%): 4.7727
- High Yield (%): 4.7750
- Bid/Cover: 3.7100x
- Allotted at Highest Accepted Yld as % of Bid at that Yld (%): 48.2
- Bidders: 40, successful 16, allocated in full 9
