Foreign investors are storming into Japan’s once-placid government bond market, exposing the world’s second-largest pool of sovereign debt to bouts of volatility sparked by traders thousands of miles away.
Overseas investors now account for roughly 65% of monthly cash JGB transactions, up from 12% in 2009, Japan Securities Dealers Association data show. While they’re on course to scoop up more Japanese government bonds this year than in any period since records began in 2005, according to Ministry of Finance data, not everyone’s a buyer and increased foreign involvement also raises the risk of a rapid or unruly retreat.