JAPAN DATA: Offshore Investors Preferring Local Bonds To Stocks So Far In 2025
In absolute terms, weekly offshore investment flows were more modest in the week ending Feb 14 for Japan, see the table below. Offshore investors sold local stocks for the third straight week. This brings cumulative outflows for 2025 to date, although the sum is fairly modest at -¥183.5bn. Price action in Japan equities has largely been sideways in recent months. Greater interest may be in markets like Hong Kong, which have seen meaningful outperformance over this period.
- Offshore investors did buy local bonds though, more than offsetting the prior week's outflow. The bias for this segment has been fairly consistent inflows since the start of the year. JGB yields continue to push higher amid firmer domestic data/BoJ tightening expectations.
- In terms of Japan outbound flows, we saw local investors continue to buy offshore bonds, after last week's surge. Again, the bias in this segment has generally been for outflows since the start of year.
- Last week also saw a recovery in offshore equity purchases, albeit modestly compared to the prior week's net selling. In 9 out of the past 10 weeks we have seen local investors buy overseas equities.
Table 1: Japan Weekly Offshore Investment Flows
| Billion Yen | Week ending Feb 14 | Prior Week |
| Foreign Buying Japan Stocks | -352.8 | -384.4 |
| Foreign Buying Japan Bonds | 788.8 | -187.8 |
| Japan Buying Foreign Bonds | 241.0 | 1755.6 |
| Japan Buying Foreign Stocks | 345.4 | -1267.4 |
Source: MNI - Market News/Bloomberg
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FOREX: USD Weakness Continues, USD/JPY Close To 50-day EMA Downside Test
Early G10 FX trends are skewed against the USD, the BBDXY index is edging down last near 1301. We are just above intra-session lows from Monday's session (close to 1300).
- Yen is outperforming at the margins, so far today, after lagging broader USD softness. USD/JPY was last near 155.20/25, around 0.20% stronger in yen terms. We are slightly up from session lows (155.17). Downside focus in the pair is likely to rest just under 155.00, where the 50-day EMA comes in (154.97). This region has also marked recent lows.
- AUD/USD is up a more modest 0.1%, it's 50-day EMA up at 0.6335, the pair last near 0.6280, while NZD is slightly outperforming, around +0.20% higher to 0.5680/85. This pair's 50-day EMA is at 0.5734.
- EUR and GBP are both a touch higher, but largely on the sidelines for now.
- Cross asset sentiment is weighing on the USD. US Tsy futures pointing higher, along with US equity futures (+0.57% for Eminis), as the markets digest Trump's inauguration. The positive sign around no Day 1 tariff announcements the main driver of better US equity futures, lower US yields and a softer USD.
- Today's data calendar is light from an Asia Pac standpoint, which will likely leave FX trends driven by headlines/cross asset trends.
US 10YR FUTURE TECHS: (H5) Trend Needle Points South
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 142.73/144.48 - High Dec 9 / High Nov 11
- PRICE: 141.11 @ 16:39 GMT Jan 20
- SUP 1: 140.00 - Round number support
- SUP 2: 139.38 - 2.764 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 138.87- 3.000 proj of the Aug 6 - Sep 3 - 9 price swing
A clear downtrend in JGB futures remains intact and the latest fresh cycle lows reinforce this condition. Note too that moving average studies on the continuation chart are in a bear-mode setup, highlighting a clear downtrend. The move down exposes the 140.00 psychological handle next. For bulls, a reversal would open 142.73 and 144.48, the Dec 9 and Nov 11 high respectively. For now, short-term gains are considered corrective.
NEW ZEALAND: Services Sector Weak But Improves In Q4
Business NZ/BNZ’s performance of services index fell to 47.9 from 49.1 but the Q4 average was still 2 points higher than Q3 at 47.7 signalling that the sector contracted at a slower rate in the final quarter of 2024. All components remain under 50 though signalling continued services weakness, as is the case with manufacturing too.
- The December drop was driven by activity, inventories and supplier deliveries. Orders were stable just below the breakeven-50 level, while employment rose 0.7 points to 47.4 (highest since August).
- Businesses remain concerned about the cost of living and the weakness in the economy. The share of negative comments in December rose to 57.5% up from 53.6% but still lower than October’s 59.1%.
- BNZ notes that the PSI remains below Australia’s services PMI, which is just in growth territory at 50.8.
NZ PSI vs PMI manufacturing
