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    Foreign investment in Japanese stocks fell to ¥-342.2 billion from ¥-1 billion.

    by VT Markets
    /
    Jan 8, 2026
    Japan’s foreign investment in stocks dropped significantly, falling to ¥-342.2 billion in December from ¥-1 billion previously. This decline points to a loss of confidence in the market and may signal broader economic issues or changes in market sentiment. The fluctuations in foreign investment raise concerns about the future of Japan’s stock market. These shifts occur as the country faces both local and global economic challenges.

    Foreign Investors Pulling Out

    There’s a clear warning sign: foreign investors withdrew a net ¥342.2 billion from Japanese stocks last month. This marks a big turnaround after a strong year where the Nikkei 225 soared past 42,000 in November 2025. The data shows that large overseas funds might be cashing in their profits. With this recent trend, it might be wise to consider buying put options on the Nikkei 225 index for the upcoming weeks. The retreat of investors corresponds with growing speculation that the Bank of Japan may signal a policy change in the first quarter. This could strengthen the yen and increase pressure on stocks. We saw similar market reactions cause temporary dips during speculation about policies back in 2024.

    Impact On Currency Markets

    The currency market is crucial in this scenario, with the USD/JPY rate remaining high around 156 through late 2025. Foreign investors might be selling stocks now to prepare for a potential strengthening of the yen, which would lower their returns when converted back to dollars. This makes currency-hedged strategies or direct bets on a declining USD/JPY rate more appealing. This large outflow indicates increasing uncertainty, and we should expect more market volatility. The Nikkei Volatility Index has already risen from a low of 16 to over 19 in the past few weeks, showing heightened market concern. In this environment, buying option premiums, such as through straddles, is a viable strategy to profit from a significant market shift in either direction, although the current trend seems to lean downwards. Create your live VT Markets account and start trading now.

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