A rapid influx of foreign capital into Japanese government bonds has triggered heightened market volatility, with overseas traders increasing their holdings by over 14 trillion yen in Q4 2025. The surge reflects growing confidence in Japan's yield curve control framework and reshapes the dynamics of one of the world’s largest bond markets.
- Foreign investors increased net long positions in Japanese government bonds by 14.3 trillion yen in Q4 2025
- The 10-year JGB yield remained capped at 0.5% despite rising global interest rate divergence
- Net foreign holdings of JGBs now exceed 28% of total outstanding debt, up from 21% in early 2025
- Volatility in 10-year JGB yields spiked to 1.8% annualized in November 2025, the highest in five years
- The Bank of Japan’s yield curve control program continues to be a key anchor for foreign positioning
- Domestic institutions reduced bond purchases by 6.1 trillion yen during the same period, indicating a shift in market participation
Foreign investors have significantly deepened their exposure to Japanese government bonds, amassing a net long position of 14.3 trillion yen in the final quarter of 2025, according to preliminary data from the Bank of Japan's reporting system. This marks the highest quarterly inflow since 2014 and signals a structural shift in global fixed-income allocation patterns. The surge follows the BoJ’s decision to maintain ultra-low yields on 10-year JGBs at 0.5% despite inflation pressures, drawing capital seeking yield in a globally constrained environment.