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The Presence of Foreign Open-End Funds in Japan's Financial Markets

August 8, 2025
Kenta Yamamoto*1
Tomohiro Okubo*2
Nobuhiro Abe*3
Yukio Minoura*4

Abstract

In recent years, the rising share of NBFIs (Non-Bank Financial Intermediaries) in the global financial system has been accompanied by an increase in the presence of foreign open-end funds in Japan's financial markets. This paper first documents the fund flows into equity, bond, and real estate open-end funds investing in Japanese financial assets, as well as their buying and selling behavior, using granular data sets. Similar to the findings by existing studies, we find there are significant outflows from foreign open-end funds investing in Japanese financial assets occurred during events such as the global financial crisis and the COVID-19 pandemic, as well as during episodes of rising policy interest rates abroad. These funds sell their assets, including their Japanese assets, in response to redemption requests. Next, we estimate the sensitivity of asset prices in Japan's stock and REIT markets to asset sales by market participants to understand the impact of trading by foreign open-end funds on Japan's financial markets. The estimated sensitivity is statistically significantly positive and its magnitude is found to be close to estimates for the United States reported in the literature. These findings together imply that outflows from foreign open-end funds could affect asset prices in Japan's financial markets through asset sales during periods of stress originating abroad or when uncertainty in domestic financial markets rises.

JEL classification
G01, G11, G12, G15, G23

Keywords
global investment funds, NBFIs, fund flows, price impact
  1. *1Financial System and Bank Examination Department, Bank of Japan
    E-mail : kenta.yamamoto@boj.or.jp
  2. *2Financial System and Bank Examination Department, Bank of Japan
    E-mail : tomohiro.ookubo@boj.or.jp
  3. *3Financial System and Bank Examination Department, Bank of Japan (Currently in the Monetary Affairs Department)
    E-mail : nobuhiro.abe@boj.or.jp
  4. *4Financial System and Bank Examination Department, Bank of Japan (Currently in the Secretariat of the Policy Board)
    E-mail : yukio.minoura@boj.or.jp

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