Foreign investors bought record Japanese stocks and bonds in April as Donald Trump's "liberation day" tariffs made Tokyo a global safe haven for "debt paying" trade.
Data released by the Treasury this week showed that last month, overseas investors were net buyers of Y8.2TN ($57 billion) Japanese securities due to extreme volatile markets and dollar flows.
This marks the biggest monthly impulse for Japanese assets since comparable records began in 2005, three times higher than the 20-year average in April.
The unprecedented buying spree of foreign investors involved $25.5 billion in net stock purchases, the largest since April 2023 and $31.5 billion in long-term bonds, the largest since July 2022.
Traders say the purchase of Japanese government bonds (JGB) by global central banks may increase the total.
Yujiro Goto, chief FX strategist at Nomura, said Japan's long-term debt "much more than" the seasonal model and stood out with a hurry to stocks.
He said overseas investors may have been transferring U.S. funds to Japan, part of the “underwriting” trend, which considers Japan as a logical choice due to the size and relative stability of its market.
Mansoor Mohi-Uddin, chief economist at Bank of Singapore, said the huge "buy Japan" frenzy in April has already happened against the backdrop of investors' shock, amid U.S. policy shifts, a trade war and Trump's criticism of U.S. Federal Reserve Chairman Jay Powell.
"It might make sense for Japan to see the impact of defaults in April," Moshi-Udin said. "It could be that we're seeing some movements in foreign central banks entering JGB. When they diversify, they're looking for liquid markets, and for reserve managers, Japan stands out in this regard."
The market has stabilized as Trump agreed this week to stop additional tariffs on China within 90 days, and it is unclear whether stampedes will continue to invest in Japanese assets.
In its latest monthly survey of institutional investors released on May 9, Bank of America pointed out in its fund manager that the overall impact of changes in the Trump administration's economic policy will be the overall impact of the United States.
The same survey conducted in the period following Trump’s “countdown” tariff announcement found that the “short-term dollar” has become the most popular trade among fund managers.
BOFA analysts wrote that while Trump's policy has caused uncertainty and led many to question the dollar's "safe haven" status, its status "is in absolute meaning and intact relative to all viable alternative currencies."