Japanese investors sold the largest amount of German government bonds in a decade in April as the securities rebounded from a selloff the previous month spurred by fiscal concerns.
Net sales totaled JPY1.48 trillion ($13.2 billion), the most since 2014, the latest balance-of-payments data from the Asian nation’s Ministry of Finance (MoF) showed on Monday. That was also the largest among the 12 sovereign bond markets tracked by the ministry, referring to debt securities issued by governments, their agencies and local authorities.
German bonds sold off sharply in early March, when the government announced plans to unlock hundreds of billions of euros for defense and infrastructure investments. The 10-year yield surged 50 basis points in a matter of days as investors prepared for more debt issuance in coming years to fund the increased spending.
But the move reversed in April, as US president Donald Trump announced steep trade tariffs and triggered a flight to haven assets. Uncertainty around the US policies led investors to question the safety of the nation’s assets, and boosted the appeal of German bonds as an alternative.
“Yields jumped so abruptly in early March that many Japanese investors couldn’t get out of German bonds,” said Hideo Shimomura, senior portfolio manager at Fivestar Asset Management in Tokyo. “I imagine the thinking would have been to reduce exposure once yields started to decline” assuming Germany’s change in fiscal policy continued, he said.
The Ministry of Finance data also shows Japanese investors sold JPY1.1 trillion of US teasuries in April, while adding JPY336 billion to French debt, the most among the countries tracked. They also bought a record JPY1 trillion of European stocks, according to data going back to 2009.
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As the world’s richest economies roll out big spending and borrowing plans, global investors have been moving into lower-quality but improving credits such as Italy and Greece that are reining in deficits. The yield gap between German and Italian government benchmarks has narrowed to about 90 basis points, the lowest since 2021.
Japanese government bonds, in the meantime, have largely underperformed peers since mid April amid weak appetite for long-dated debt. The Bank of Japan is scaling back its bond purchases as inflation accelerates, but traditional buyers like the nation’s life insurers aren’t filling the gap left behind.
