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On the JPY flow side, Japanese investors resumed foreign bond purchases last week as they bought JPY818bn (USD7.4bn) of foreign bonds, the largest net purchases in three weeks, notes the research team at Nomura.

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“After purchasing foreign bonds more aggressively than the historical average in April to early May, their activity slowed, as market concerns over Italy’s politics rose. June MOF international portfolio investment data showed Japanese investors were small net sellers of Italian bonds.”

“They also sold US and German bonds in June, as foreign bond price volatility rose temporarily. Japanese investors tend to sell foreign bonds when volatility rises, and the slowdown when Italian political uncertainty rose was unsurprising.”