October saw the BoJ’s announcement of increased stimulus, coordinated with the new targets for the GPIF, 25% each for foreign and domestic equities (up from 12% each), and a decrease in JGBs, from 60% to 35% of holdings. Investors, both Japanese and foreign, have reacted as expected when it comes to JGBs. Both types of investor have reduced their net purchases of Japanese bonds, leaving the BoJ to swallow up more and more of JGB inventory (falling red lines in next two charts).
However, when it comes to equities, Japanese and foreign investors’ opinions diverge. Foreigners have increased their net purchases significantly, with the 4 week sum of net purchases of Japanese equities rising to a high from at least 2005 (top chart above). But Japanese individual accounts have become big sellers of their own equities (next chart), clearly at odds with foreigners’ actions.