SynopsisJapanese investors significantly increased foreign stock purchases last week. This buying spree followed easing inflation worries and softer U.S. labor market data. Overseas bond selling continued as investors reduced debt holdings. Foreign investors also sold fewer Japanese stocks and bonds. Market outlook remains cautious due to oil price volatility and central bank policy.ETMarkets.comWhile Japanese investors increased exposure to foreign equities, they continued reducing their holdings of overseas debt.Japanese investors sharply increased purchases of foreign equities in the week ended July 4, encouraged by easing inflation concerns and signs of a softer U.S. labour market that reduced expectations of further interest rate hikes by the U.S. Federal Reserve.According to data released by Japan's Ministry of Finance and reported by Reuters, Japanese investors bought a net 824.5 billion yen ($5.08 billion) worth of overseas stocks during the week. The inflow marked the strongest weekly buying since April 4, reflecting improved investor sentiment toward global equities.The buying spree came after oil prices dropped to their lowest levels in more than four months last week, helping ease inflation worries that had weighed on financial markets. Lower energy prices strengthened expectations that inflationary pressures could continue to moderate, reducing the likelihood of additional monetary tightening by the Federal Reserve.However, the decline in crude prices proved short-lived. Brent crude rebounded more than 5% to $78.02 per barrel on Wednesday after renewed geopolitical tensions in the Middle East reignited concerns over potential supply disruptions, adding fresh uncertainty to the inflation outlook.Reuters reported that Federal Reserve Chair Kevin Warsh reiterated last week that the U.S. central bank remains committed to its 2% average annual inflation target, while indicating that inflation risks stemming from conflict-related price shocks had eased.Overseas Bond Selling ContinuesWhile Japanese investors increased exposure to foreign equities, they continued reducing their holdings of overseas debt.Net sales of foreign long-term bonds totaled 218.1 billion yen during the week, marking the second consecutive week of divestments. Investors also sold 124.3 billion yen worth of short-term foreign bills, suggesting continued caution toward global fixed-income markets amid evolving interest-rate expectations.Foreign Outflows From Japanese Equities EaseForeign investors remained net sellers of Japanese stocks, although the pace of selling slowed significantly.According to Reuters, overseas investors sold a net 22.2 billion yen worth of Japanese equities during the week, a sharp improvement from the hefty 1.82 trillion yen in net outflows recorded in the previous week.Foreign selling of Japanese government bonds also moderated. Overseas investors trimmed their holdings of long-term Japanese bonds by a net 5.9 billion yen, representing the smallest weekly outflow in five weeks.Market OutlookThe latest cross-border investment data suggest that Japanese investors are becoming more optimistic about overseas equity markets as expectations of further U.S. monetary tightening diminish. However, renewed strength in oil prices driven by geopolitical tensions could complicate the inflation outlook and influence global central bank policy in the coming months.Going forward, investors are expected to closely monitor developments in energy markets, U.S. inflation data and Federal Reserve policy signals, as these factors will likely shape international capital flows and global market sentiment.Read More News on(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price...moreless(You can now subscribe to our ETMarkets WhatsApp channel)Read More News on(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price...moreless