Oil prices shrouded in shadows: Foreign capital sells Japanese stocks for the first time this year, buying momentum halted abruptly after nine weeks.

Last week, foreign investors turned net sellers of Japanese stocks for the first time since 2026, as the market became increasingly concerned that rising oil prices would impact the Japanese economy. Data from the Japan Exchange Group showed that for the week ending on March 13, overseas investors sold a net total of approximately 491 billion yen (about 31 billion USD) of Japanese cash stocks, marking the largest weekly net sales since September of last year. This selling spree ended a nine-week buying streak, which was mainly driven by optimism over Japanese Prime Minister Sanae Takamichi's fiscal expansion policy. The outlook for the Japanese stock market has dimmed due to fears that a potential war in Iran leading to rising oil prices would exacerbate inflation and weigh down corporate profits. Japan relies on the Middle East for over 90% of its oil imports, and its industrial supply chain is heavily dependent on the region's crude oil. Naoya Oshikubo, Chief Market Economist at Mitsubishi UFJ Trust and Banking, stated, "Many investors believe that Japan is one of the countries most affected by rising oil prices. This is why the Japanese stock market is underperforming." The Nikkei index rose by 17% in the first two months of 2026, but has since dropped by 9.3% since the outbreak of the conflict in Iran, while the S&P 500 index has fallen by 3.7% over the same period. The Bank of Japan announced on Thursday that it would maintain its interest rates and included the Middle East conflict in its list of risk factors. Bank of Japan Governor Kachikata Kazuo stated that he expects rising oil prices to exert upward pressure on Japanese prices. Oshikubo stated that investors have become more cautious in recent days due to the summit between Takamichi Sanae and Trump scheduled to take place in Washington on Thursday. "Investors are worried about difficult negotiations with Trump regarding his orders to deploy warships to the Middle East," he said.