JPMorgan data shows that foreign investors returned to the Japanese stock market in July, with cumulative purchases this year exceeding those of the same period in previous years. However, simultaneously, foreign investment in Japanese medium- and long-term government bonds has seen net outflows for two consecutive months, occurring during a period of sustained rise in Japanese government bond yields.
This indicates that the market has not increased its allocation to Japanese bonds in tandem with rising Japanese interest rates.
More importantly, this divergence suggests that foreign investors are currently more willing to bet on Japanese corporate profits and stock market performance, rather than directly betting on the attractiveness of bonds due to higher yields.
In other words, the revaluation of Japanese assets is being primarily reflected in the equity sector, rather than the bond sector. For the market, this also suggests that the logic of "rising Japanese interest rates = a full-scale return of overseas funds to Japan" is not valid.
At least based on July's fund flows, stocks and bonds are still being priced completely differently.
