TOKYO: Japanese equities saw a sharp revival in foreign investor interest in the week ended Jan 10, with overseas funds recording their strongest net inflow in more than two months, supported by a rally in local share prices and improving corporate earnings prospects.

Figures from Japan’s Ministry of Finance showed foreign investors were net buyers of ¥1.14 trillion worth of domestic equities during the week — the largest weekly inflow since late October — signalling renewed confidence in the Japanese market.

The inflows coincided with record highs in key benchmarks, with both the Nikkei 225 and Topix advancing more than 3% over the week, reflecting broad-based gains across export-oriented and cyclical sectors.

A weaker yen provided an additional tailwind. The currency slid to an 18-month low against the US dollar, enhancing profit outlooks for exporters and increasing the relative attractiveness of Japanese stocks for offshore investors.

Foreign appetite extended beyond equities, with net purchases of long-term Japanese government bonds reaching ¥1 trillion, while short-term treasury bills attracted ¥3.59 trillion — the largest weekly net inflow since early May 2024.

Meanwhile, the yield on the benchmark 10-year Japanese government bond climbed to 2.180% on Wednesday, its highest level since February 1999, underscoring pressure in the bond market as yields move inversely to prices.

By contrast, Japanese investors reduced exposure to overseas equities, with weekly net purchases falling sharply to ¥27.5 billion from ¥236.6 billion the previous week.

In foreign bond markets, Japanese investors returned as modest net buyers of long-term debt, adding ¥101.1 billion after two consecutive weeks of net outflows.