Japanese investors exhibited a cautious approach towards foreign bond purchases in February, influenced by declining US bond prices and the anticipation of postponed rate cuts by the Federal Reserve.

Data released by Japan's Ministry of Finance revealed that domestic investors scaled back their acquisitions of overseas bonds, totaling 1.81 trillion yen ($14.3 billion) on a net basis. This figure represented a notable decrease from the 2.69 trillion yen recorded in January. Similarly, investments in foreign equities also experienced a downturn, amounting to approximately 245.2 billion yen compared to 733.7 billion yen in the previous month.

The purchase of long-term foreign bonds by Japanese banks notably decelerated in February, dwindling to 439 billion yen from 1.3 trillion yen in January. Conversely, trust accounts ramped up their investments, injecting around 1.02 trillion yen into these debt instruments, marking a substantial increase from 350.6 billion yen in January.

On the other hand, insurance companies adopted a selling stance, offloading 306.6 billion yen in long-tenure overseas bonds, marking their largest net disposal in three months.

Bank of Japan data further highlighted Japanese investors' activity in January, where they registered their most significant monthly net purchase of US bonds since September 2023, amounting to 3.28 trillion yen. Concurrently, investors allocated 17.92 billion yen towards European debt, while divesting 13.42 billion yen of British securities.

(With Reuters inputs)