Japanese investors were net buyers of foreign bonds in the week to Aug. 24, capitalizing on relatively higher U.S. bond yields amid expectations that the Bank of Japan might take longer than initially expected to consider its next interest rate hike.

They invested a substantial 1.54 trillion yen ($10.65 billion) in long-term foreign bonds, marking a fourth consecutive week of net purchases. However, they sold short-term overseas debt securities for a second straight week, totalling approximately 109 billion yen on a net basis.

A rate hike by the BOJ earlier this month pushed the yen to an eight-month high, prompting investors to unwind their carry trades in favour of overseas bonds.

Although the yen has stabilized, it remains near a three-week high reached on Tuesday, following the recent escalation of geopolitical tensions in the Middle East.

Japanese investors also increased their purchases of foreign equities in the week to Aug. 24, spurred by a rally in overseas markets fuelled by optimism over expected Federal Reserve interest rate cuts starting in September.

They purchased a net 898.8 billion yen worth of overseas equities during the week, posting their largest weekly net purchase in three weeks, data from the Ministry of Finance showed.

The MSCI All-Country World Index reached new highs after Fed Chair Jerome Powell's remarks at an economic conference in Jackson Hole last week solidified expectations that the U.S. central bank will implement its first rate cut at the Sept. 17-18 policy meeting.

Japanese long-term bonds gained a net 859.4 billion yen worth of foreign inflows as outsiders remained net buyers for a third successive week. Foreigners, however, ditched 2.66 trillion yen of short-term instruments, the most in a week since April 27.

Non-native investors, meanwhile, withdrew a net 438.3 billion yen from Japanese stocks, which was their fifth weekly net selling in six weeks.

Meanwhile, data from stock exchanges revealed that foreigners sold a net 398.89 billion yen worth of cash equities in the week ending Aug. 23, after two consecutive weeks of net purchases. They also sold a net 396.5 billion yen worth of derivatives.

($1 = 144.6400 yen)

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Rashmi Aich and Eileen Soreng)