Japanese stocks bleeding foreign outflow at record pace

Latest data from Japan's Ministry of Finance (MOF) suggests that outflow is continuing in Japanese equities and in 2015, the pace of outflow from the market was not seen in more than a decade. In August, in a single week, ¥ 1.42 trillion left Japanese stocks, which was sold by foreign investors.

Outflow however moderated since then, in last reported week, foreign investors sold ¥ 177.3 billion worth of Japanese equities. In last reported 8 weeks, foreign investors have sold ¥ 4.8 trillion worth of Japanese equities, in all of which foreign investors were net sellers.

Reasons behind outflow -

• Bank of Japan (BOJ) hasn't signaled further expansion to its Quantitative and Qualitative Easing (QQE), which is dampening mood, given lower inflation outlook.
• Global uncertainty has increased with FED holding liftoffs in September and Peoples Bank of China (PBoC), devaluing Yuan in August.
• Japanese pension funds after adjusting its portfolio has stopped buying into Japanese equities.
• Yen's competitive devaluation edge is lost via sharp fall in Euro and emerging market currencies.
• Yen has remained relatively elevated given overall risk aversion.
• Japanese economy hasn't picked up as originally expected.

If BOJ refrains from raising its asset purchase program on October 30th, there could be further sell offs in Japanese stocks.

Japanese benchmark stock index Nikkei (CFD) is currently trading at 18140, down 13.4% from its peak in August.