Sharp yen weakness and rising bets on earlier BOJ tightening drove global funds
to record sales of short- and medium-term JGBs in July. Japan Securities Dealers
Association data showed net JGB sales of 1.28 tln yen in July, the largest since
July 2006; foreign investors nonetheless net bought 889.8 bln yen of
10-year-plus bonds. Late July’s fall in USD/JPY to its weakest since 1986
prompted historic joint intervention by Japan and the U.S. The Bank of Japan
left policy unchanged on July 31, but Governor Ueda signaled possible action in
September. Mitsubishi UFJ strategist Keisuke Tsuruta said rising expectations of
a faster BOJ tightening cycle likely underpinned the foreign net selling.
