Foreign capital is snapping up Japanese stocks, with the net weekly purchase volume hitting the highest level since 2014!

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Foreign capital is pouring into Japanese stocks at the fastest pace in a decade. In the week following Sanae Takaichi's election victory, net purchases by overseas investors of Japanese stocks and index futures hit a more than ten-year high.

Data released by the Japan Exchange Group on Thursday showed that in the week ending February 13, net purchases of Japanese stocks and index futures by foreign investors totaled 1.78 trillion yen (about $11.5 billion), marking the largest single-week inflow since November 2014. This influx closely followed Sanae Takaichi's victory, with expectations of political stability and increased government spending driving buying activity.

Since the beginning of the year, Japanese stocks have significantly outperformed US stocks. The TOPIX has risen 10% so far this year, while the S&P 500 has only seen a slight increase. Global investors are seeking more reliable sources of returns outside the US market, and Japan is benefiting from this trend.

Multiple factors are driving this wave of capital inflow, including Sanae Takaichi's fiscal expansion plans, the benefits for exporters from the weaker yen, and ongoing pressure from activist investors.

Fiscal Expansion Expectations Boost Market Sentiment

Russell Shor, Senior Market Strategist at trading platform Tradu based in Johannesburg, said that if one is looking for investment opportunities outside the US right now, Japan is one of the top choices.

He pointed out that the post-election political stability is of great significance—not just the stability itself, but also Sanae Takaichi's advantage in winning. This makes Japan particularly attractive, Takaichi's election win has injected confidence in policy continuity into the market.

Optimistic expectations for Sanae Takaichi's fiscal expansion plans are the main driving force for the capital inflow. Investors expect her policies to boost various sectors like artificial intelligence, energy, and shipbuilding, offering growth opportunities to related industries.

Meanwhile, the continued weakening of the yen provides tailwinds for export-oriented companies, further enhancing the appeal of Japanese stocks. Ongoing pressure from activist investors is also pushing for improvements in corporate governance and increased shareholder returns.

Fading Luster of US Stocks Drives Capital Shift

In recent months, volatility in the AI sector and geopolitical concerns have weakened the appeal of US stocks. Shor said that, in this context, the equity risk premium of Japanese stocks is particularly attractive to global fund managers.

Global investors are actively seeking to diversify their portfolios and reduce reliance on the US market. With relative valuation advantages, policy support expectations, and a stable political environment, Japan has become a key destination for capital reallocation.

Risk Disclosure and DisclaimerThere are risks in the market, and investments require caution. This article does not constitute personal investment advice and does not take into account the special investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views or conclusions in this article are suitable for their particular circumstances. Investments made accordingly are at one's own risk. ```