Japan’s foreign investment in domestic stocks reached ¥655.6 billion for the week ending November 28. This marked a significant shift from the previous week, which saw an outflow of ¥348.7 billion. This increase shows greater international interest in Japanese stocks, likely due to better market conditions and positive outlooks for corporate earnings.

Economic Confidence and Recovery

Trends in foreign investments can be a sign of economic confidence. The rise in investments might suggest optimism about Japan’s economic recovery and growth potential. Japan’s strategies to attract foreign capital seem to be yielding results. This increase indicates a positive reaction to reform efforts. More foreign capital could uplift the stock market and support future growth. The change from a ¥348.7 billion outflow to a ¥655.6 billion inflow signals strong potential for Japanese stocks. This renewed foreign interest suggests it’s time to consider the upside for the Nikkei 225 and TOPIX indices as we approach the end of the year. This is the largest weekly inflow we’ve seen since the second quarter of 2025. Given this trend, investing in Nikkei 225 futures for the December and March contracts looks promising. We previously observed a similar surge in late 2023 when foreign buying pushed the index up over 8% in one quarter. This history supports the chance of a significant rally as year-end approaches.

Market Strategies and Potential Impact

For option traders, buying at-the-money call options on major indices is a straightforward strategy to benefit from a potential market increase. Another strategy is to sell out-of-the-money put spreads, allowing us to earn premium by betting that this new capital will create a strong market floor. The Nikkei Volatility Index is currently around 16.2, making premium-selling strategies appealing. We should also watch the USD/JPY exchange rate, as these large equity purchases usually lead to buying yen, which strengthens it. Looking back at the trends from Q4 2024, a similar inflow of investments caused the USD/JPY to drop from 151 to below 145. As a result, JPY call options or short positions in USD/JPY futures could be a good complementary strategy. Investor confidence is further supported by the Bank of Japan’s recent statements indicating a continued accommodative policy into early 2026. Many companies have also exceeded profit expectations, with over 60% of TOPIX-listed firms beating their forecasts last quarter. This mix of supportive policy and solid fundamentals strengthens the case for a stronger market in the weeks ahead. Create your live VT Markets account and start trading now.

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