TOKYO, Oct 24 (Reuters) - Net foreign bond buying by Japanese investors jumped to a two-month high of $14.5 billion last week, encouraged by the resolution of the U.S. fiscal impasse and yields on Japanese government bonds falling to a five-month low.
They bought 1.413 trillion yen ($14.5 billion) worth of foreign bonds in the week through Oct. 19, adding to 386.9 billion yen of net buying the prior week, data from the Ministry of Finance showed.
The two consecutive weeks of net purchases followed record net selling of 2.224 trillion yen in the week through Oct. 5, amid concerns over whether U.S. lawmakers would reach a deal to raise the federal debt limit by mid-October and avoid an historic default.
Purchases of overseas assets could potentially weaken the yen, providing a tailwind to Japanese exporters, although any impact on foreign exchange markets would be diminished if investors hedge their bond purchases.
Last week's substantial net purchase of foreign bonds by Japanese investors came at a time when yields on benchmark 10-year JGBs were falling, partly driven by the Bank of Japan's bond-buying to revive the world's third-largest economy.
The 10-year JGB yield was flat at 0.600 percent on Thursday, matching a five-month low reached on Wednesday.
Foreign investors were net buyers of Japanese equities for a second week, with an inflow of 297.8 billion yen after 144.7 billion worth of net purchase the week before.
They have ploughed 10.8 trillion yen into Japanese stocks so far this year, as Prime Minister Shinzo Abe has embarked on fiscal and monetary expansionary policies to pull the country out of 15 years of deflation, sending the benchmark Nikkei up 38 percent year-to-date.
That compared with 153.9 billion yen of net inflows in the first 10 months of 2012.
($1 = 97.2900 Japanese yen)
(Reporting by Dominic Lau; Editing by Eric Meijer) Keywords: JAPAN ECONOMY/CAPFLOW
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