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Foreign Investors Double Down on Japan: A Third Week of Buying Amid Sector Shifts

Cyrus ColeThursday, Apr 24, 2025 4:51 am ET

5min read

The past three weeks have seen foreign investors pour over ¥4.32 trillion into Japanese equities, marking one of the most sustained inflows in years. But behind the headline numbers lies a story of strategic sector rotations, geopolitical jitters, and a fiscal stimulus package that’s reigniting investor optimism. Let’s unpack the data, the trends, and what it means for portfolios.

The Three-Week Surge—and a Sneak Peek at the Fourth

Foreign buying hit a three-week high in the week ending April 18, with net purchases of ¥1.35 trillion, the highest since early 2023 (see chart below). This followed a dip in the prior week (¥950 billion) as investors rotated out of export-sensitive tech stocks like Sony (6758.T) and Toyota (7203.T) and into renewable energy firms such as Marubeni Energy and construction giants like Obayashi Corp. (1801.T). Even with a tentative ¥820 billion inflow in the preliminary April 21–24 week, the momentum remains undeniable.

Sector Rotations: From Tech to Infrastructure—and Back Again

The data reveals a clear pattern of sector-specific volatility, driven by global macro signals and domestic policy shifts:

Week 1 (March 31–April 4):
Foreign investors piled into technology and autos, betting on Japan’s semiconductor revival and strong U.S.-Japan trade ties. Sony (6758.T) and Toyota (7203.T) saw significant inflows, with their shares rising 4% and 3%, respectively, during the week.
Week 2 (April 7–11):
Profit-taking emerged in export-heavy sectors as concerns over global semiconductor demand grew. Investors instead turned to renewables, with Marubeni Energy (8002.T) up 6% on hopes of Japan’s green energy subsidies.
Week 3 (April 14–18):
A fiscal stimulus package promising ¥20 trillion in infrastructure spending sparked a cyclical rally. Obayashi Corp. (1801.T) surged 9%, and materials firms like Nippon Steel (5401.T) saw inflows as investors bet on construction booms.
Week 4 (April 21–24):
Defensive sectors like healthcare (e.g., Takeda Pharmaceutical (4502.T)) and utilities (e.g., Tokyo Electric Power (9501.T)) drew modest inflows ahead of Japan’s Golden Week holiday, while tech stocks faced minor outflows.

Why Now? Fiscal Stimulus, Yen Weakness, and Global Diversification

Three factors are fueling this buying spree:

Japan’s Fiscal Stimulus:
The government’s pledge to boost infrastructure spending has created a “sweet spot” for construction and materials firms. Over 60% of week-three inflows targeted these sectors, per Tokyo Exchange data.
Yen Depreciation:
The yen’s 3% decline against the dollar in Q1 2025 has supercharged profits for exporters like Canon (7751.T) and Honda (7267.T), making their shares more attractive to foreign buyers.
Diversification Demand:
With the U.S. tech sector peaking and China’s growth slowing, Japan’s undervalued stocks (the Nikkei 225 trades at a 12x P/E vs. the S&P 500’s 28x) offer a rare value proposition.

The Risks Lurking Beneath the Surface

While the momentum is strong, two risks could temper the rally:
- Global Semiconductor Slump: If demand for chips weakens further, tech stocks like Sony and Renesas (6723.T) could underperform.
- Political Uncertainty: Japan’s upcoming upper house elections in July may introduce volatility if fiscal policies face backlash.

Conclusion: A Strategic Play for the Long Run

Foreign investors’ sustained buying reflects a fundamental shift in how Japan is perceived: no longer a “yield-starved afterthought” but a growth market with infrastructure-driven tailwinds. The ¥4.32 trillion inflow over three weeks—bolstered by cyclical and fiscal catalysts—suggests this isn’t a short-term blip.

Investors should focus on sector rotations tied to macro data (e.g., semiconductor orders, yen moves) and companies benefiting from fiscal spending, like Obayashi and Nippon Steel. While near-term risks exist, the data underscores a compelling case for Japan as a core holding in global equity portfolios.

The writing is on the wall: Japan’s era of stagnation is fading. For now, the bulls are in charge.

Data sources: Tokyo Stock Exchange, Refinitiv, company reports.

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