JPM Japan Flows

J P M O R G A N Global Markets Strategy 08 September 2026

Japan Flows & FX Positions No evidence of GPIF reallocation in August data

• The closely monitored monthly data revealed net foreign equity purchases of Japan Markets Research ¥0.6trn (JPMe: -¥1.7trn) and net foreign bond purchases of ¥2.3trn (JPMe: + Ikue Saito AC ¥0.9trn) by “Trust Accounts,” which reflect pension funds’ activities. Both ( figures point to continued net accumulation of foreign assets — contrary to prevailing market speculation which expects a shift towards domestic assets JPMorgan Chase Bank, N.A., Singapore Branch

from foreign assets. Junya Tanase ( • Retail investors turned JPY short following the sharp JPY move last week. JPMorgan Securities Japan Co., Ltd. • Retail investors net purchased ¥1.3trn of foreign equities in August, the largest net purchase since January, underscoring sustained appetite for foreign assets despite a concurrent rise in retail JGB demand. • We do not view the uptick in retail JGB demand as a headwind to foreign equity allocation, as current JGB yields — 1.96% (3Y fixed), 2.24% (5Y fixed), and 1.95% (10Y floating) — suggest the rotation is largely funded from bank deposits rather than a reallocation away from foreign equity. We expect retail appetite for foreign equities as well as structural JPY selling flow to remain intact.

Japanese Institutional Flows: No conclusive evidence of allocation shift by GPIF in August

• Japanese institutional investors net sold ¥0.1trn of foreign bonds in August, with selling pressure predominantly driven by banks, which offloaded ¥1.7trn of foreign bonds and ¥0.7trn of foreign equities during the month. In contrast, pension funds continued to net purchase foreign bonds in July (Figure 1). A P g y b d u o itfrsecn

• The closely monitored monthly data revealed net foreign equity purchases of ¥0.6trn (JPMe: -¥1.7trn) and net foreign bond purchases of ¥2.3trn (JPMe: + ¥0.9trn) by “Trust Accounts,” which reflect pension funds’ activities. Both figures point to continued net accumulation of foreign assets — contrary to prevailing market speculation which expects a shift towards domestic assets from foreign assets. (Figure 3). In our view, last week’s USD/JPY move, driven F A G T m P g u d y n o tliIfseach

by speculation over potential GPIF reallocation and an accelerated BoJ tightening path, was excessive. • With the next GPIF-related data points not due until the October monthly release (October 8th) and the GPIF quarterly report in November (November 6th), we see limited near-term catalysts on this front. From a fundamental standpoint, there is little basis to position for JPY strength in the weeks ahead. We maintain a medium-term bearish JPY outlook and continue to hold short SEK/JPY as a hedge against further policy action.

See page 6 for analyst certification and important disclosures.

Ikue Saito AC Global Markets Strategy ( September 2026 JPMORGAN

Figure 1: Pension funds continued to buy foreign bonds in August Figure 2: Currency breakdown of foreign bond investment flows ¥ in trillions; net purchases of foreign bonds by Japanese residents, classified by investor ¥ in trillions; net purchases of foreign bonds by Japanese investors, classified by currency type denomination

Others Retail Non-Life Insurance -4.0 -4.0 Lifers Brokers Pension -5.0 Others JPY HKD CNH CHF SEK -6.0 -6.0 DKK GBP EUR AUD CAD USD May June July Aug Sep Oct Nov Dec Jan Feb Mar Apr May June July Aug 2026

Source: Bank of Japan, Ministry of Finance, J.P. Morgan. Source: Bank of Japan, Ministry of Finance, J.P. Morgan.

Figure 3: The monthly data does not suggest a GPIF allocation shift in August trillion yen

Domestic Domestic Foreign Foreign bonds equities bonds equities Estimate 2.2 -1.5 0.9 -1.7 Actual ? -0.6 2.3 0.6 Source: J.P. Morgan estimates, MoF

Mrs. Watanabe’s FX margin trade positions: Turning short JPY after the drop Figure 4: Mrs. Watanabe re-entering short JPY post the big move last week Four-week average of FX margin trading positions, ¥ in trillions, cross JPY sum includes AUD/JPY, EUR/JPY and GBP/JPY

USDJPY (4w ma, LHS) CrossJPY sum(4w ma, RHS)