Japanese Stocks: Monitoring Overseas Investors’ Buying and Selling Trends

■ Since the start of the year, trusts and individuals have been the main sellers, while corporations and overseas investors have been the primary buyers.  
■ Continuous buying by corporations provides support, and bargain hunting by individuals is also expected, but caution is advised regarding fluctuations in overseas investors' buying and selling patterns.  
 
    Looking at the buying and selling activity by investment sector (Tokyo Stock Exchange and Tokyo Stock Exchange combined, spot, net since the start of the year through the third week of August), net sellers were individuals (3.2 trillion yen) and trusts (3.2 trillion yen), which are thought to reflect pension fund trends. Trusts seem to be selling for rebalancing purposes amid rising stock prices. Individual investors, on the other hand, have shifted to a selling stance since April, and selling pressure intensified in July as the Nikkei average found support around 40,000 points. This suggests that individual investors are eager to take profits as the Nikkei average continues to rise, reaching new record highs. Meanwhile, net buyers included corporations (7.2 trillion yen) and overseas investors (4.2 trillion yen). Corporate net purchases far exceeded last year's same-period total of 4.5 trillion yen, indicating that companies are increasing efforts to buy back shares and enhance shareholder returns. Additionally, overseas investors, after a sharp drop when the index hit 30,000 points on the first day of April, continued their net buying for 17 consecutive weeks through late July, currently holding significant unrealized gains. 
 

    Regarding future trends among various investment groups, trusts mainly focus on rebalancing, selling when prices rise, and buying when they fall, but they are not the main drivers of stock price direction. Even during a stock correction, corporate entities are expected to continue their share repurchase programs aligned with their capital strategies. Individual investors, having already realized some profits and holding reserve funds, are likely to buy on dips when prices decline, which could limit further drops. 

 
    Under these conditions, it is crucial to watch overseas investors' movements. Since August, there has been a mix of buying and selling activity, and the strong buying momentum seen before July seems to have eased. Previously, this momentum was driven by increased corporate shareholder returns, but further buying gains are unlikely unless uncertainty surrounding the US government's tariff policies is resolved and corporate earnings outlooks become clearer. Looking back to last year, overseas investors accumulated a net purchase of 4.6 trillion yen by mid-July but sold continuously through the year-end. In August, comments by Bank of Japan Governor Ueda raised expectations of an early rate hike, causing the dollar to weaken against the yen. Exporters' profit forecasts declined significantly, and fears of a US recession grew. The Nikkei dropped from 42,000 to 31,000 points, raising concerns about stock price volatility. If overseas markets continue to fall, Japanese stocks could be sold to lock in profits and reduce overall asset losses, which warrants close attention.