"Hurricane clouds press down on the stock market in Japan, as foreign capital withdraws massively! The scale reaches its highest in four months."

The latest statistics show that last week, overseas investors' net selling of Japanese stock index futures and spot stock assets reached the highest level since November of last year. This is an important part of a broader risk-off trade, as the outbreak of a full-scale war between the United States/Israel and Iran has led to global fund sell-offs of stock assets in Japan, South Korea, and Taiwan, China, which have strong gains and higher profit margins this year and are heavily reliant on imports of energy from the Middle East. According to data from the Japan Exchange Group, in the week starting on March 2nd, foreign investors sold approximately 983.5 billion yen of Japanese stock index futures assets, bringing the total net selling amount of stock index futures and stocks to about 745.7 billion yen, the highest level in four months. Unexpectedly, there was a net buying of approximately 237.8 billion yen in Japanese spot stocks, indicating some buy orders at lower levels amid the intense market sell-off triggered by the US and Israel's strikes against Iran. This round of conflict is expected to end quickly. The significant escalation of tensions in the Middle East and the international oil prices briefly soaring to nearly $120 weakened the risk appetite of global investors and put heavy selling pressure on the Japanese stock market. Over 90% of Japan's energy resources, such as oil and natural gas, come from the Middle East oil-producing regions around the Strait of Hormuz. The conflict in the Middle East and the surge in oil prices would directly hit its trade conditions, corporate costs, and consumer purchasing power. Since the outbreak of the Iran conflict, Tokyo's Nikkei 225 index has fallen significantly by 7.5%, far underperforming the S&P 500 index, which fell by 1.5% during the same period. The core logic behind the withdrawal of foreign investments from Japanese assets is not a long-term pessimistic narrative of "foreign investment turning bearish on the Japanese market," but rather a typical risk-off trade during wartime, combined with the high-risk exposure of Japan to Middle East energy, triggering a futures-led risk-off trade. Japanese spot stocks recorded a net buying of approximately 237.8 billion yen, indicating that this is more like "quickly reducing risk with futures and bottom-hunting opportunities in spot stocks" rather than a indiscriminate large-scale withdrawal from Japanese stocks. The AI investment boom, combined with the fiscal stimulus led by the Koizumi government, is likely to lead to a rapid return of foreign investment and continue the trend of reaching new highs in Japanese stocks in recent years. The Japanese government has now elevated "AI computing power + semiconductor industry chain reconstruction" to the level of national strategy: the government has set a target to increase domestic chip sales to 40 trillion yen by 2040, five times the current 8 trillion yen; at the same time, the global "king of chip manufacturing" Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) plans to advance 3-nanometer advanced process production layout in Japan, which is seen as an important signal for Japan to reintegrate into the global chip manufacturing chain. The Koizumi government's fiscal stimulus plan, totaling 21.3 trillion yen, along with the government's consideration of subsidies to offset the fuel impact caused by the Iran conflict, will undoubtedly have positive effects on domestic demand, capital expenditure, and risk appetite. More importantly, this bull market in Japanese stocks is not only driven by the AI investment boom and fiscal stimulus theme, but also by factors such as a significant increase in semiconductor orders, comprehensive reform of corporate governance, disentanglement of cross-shareholdings, expansion of buybacks by listed companies, and significant improvements in ROE.