Foreign buying of Japanese shares rose from ¥402bn to ¥973.9bn in the week ending 27 February. The change shows a higher net inflow into Japan’s stock market over that period. The increase from ¥402bn to ¥973.9bn equals a rise of ¥571.9bn. This compares the latest weekly figure with the previous week’s total.

Foreign Inflows Signal Rising Confidence

We are seeing a massive surge in foreign capital into Japanese stocks, with inflows more than doubling in the last week of February. This is a very strong bullish signal, suggesting that international investors are showing growing confidence in the market’s upward momentum. This level of investment is the highest we’ve seen since the major rally in the second quarter of 2025. Given this, we should consider buying call options on the Nikkei 225 index or related ETFs to capitalize on expected gains in the coming weeks. The current market shows the Nikkei has already broken through the 41,000 resistance level, and this new flood of money could provide the fuel to test 42,500. A similar inflow pattern last year preceded an 8% climb over the following month. This foreign buying spree puts upward pressure on the Japanese Yen, but the Bank of Japan’s policy is a more dominant force. With the BoJ still signaling it will maintain its accommodative stance to ensure inflation remains stable around 2%, the Yen is likely to stay relatively weak. We can use derivatives to bet on the USD/JPY pair remaining above the 152 level, which benefits Japan’s large exporters. The significant capital injection will also likely increase market volatility in the short term. The Nikkei Volatility Index has already ticked up from 16 to 19.3 in the past ten days, reflecting uncertainty about the pace of the rally. We could look at selling out-of-the-money put options to collect premium from this heightened volatility, effectively getting paid to be bullish above a certain price. We should also notice where the money is going, as recent flow data indicates a heavy concentration in semiconductor and financial stocks. These sectors have outperformed the broader market by nearly 5% since the beginning of the year. This suggests that using options on specific sector ETFs, rather than just the broad Nikkei, could provide a more targeted way for us to profit from this trend.

Sector Concentration And Options Positioning

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