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By Hiroyuki Kachi and Judy Lam

Foreign ownership of Japanese shares rose for the second straight year, according to data that also showed that the proportion of stocks held by Japanese financial institutions fell below 30% of the total for the first time.

The data, released by the Tokyo Stock Exchange and four other bourses Monday, show that foreign investors held 26.7% of the shares listed on the five exchanges as of March 31, rising 0.7 percentage point from 26.0% a year earlier.

The proportion of foreign ownership is approaching the 27.4% level seen in the fiscal year 2007, before the global financial crisis.

The data indicate that foreign investors have been actively snapping up Japanese shares, taking advantage of global monetary easing that has provided an ample flow of funds into the market, the bourses said.

Foreigners increased their net ownership of Japanese shares on the bourses in Tokyo, Osaka and Nagoya to the tune of ¥3.982 trillion (US$50 billion) for the full fiscal year ended March 31.

The active buying trend has also continued after the April start of the current business year, as foreigners accelerated their dip buying of Japanese shares following the March 11 natural disasters and subsequent nuclear crisis.

Starting in November, overseas investors were net buyers of Japanese equities for 29 straight weeks until the last week of May, marking the longest net buying streak on record. From Feb. 28 to April 1 alone, foreign investors bought a net ¥1.4 trillion of Japanese stocks.

The proportion of Japanese financial institutions’ holdings of listed shares stood at 29.7%, down 0.9 percentage point and below the 30% mark for the first time since the bourses started keeping records.

“The mainstream trend has been for Japanese financial institutions to cut their stock holdings in Japan, mainly driven by new capital requirements and grim returns prospects,” said Fumiyuki Takahashi, an equity strategist at Barclays Capital.

But he noted that foreign investors have also pulled back somewhat from aggressive buying, pointing to the week of May 23-28 when the record 29-week-net-buying streak was snapped. He said he expected foreign investors to pick up their buying pace again in the fall, when the recovery effect from the March 11 earthquake will be more pronounced.

Meanwhile, the proportion of individuals’ shareholdings on the bourses stood at 20.3%, up 0.2 percentage point.

The number of individual shareholders rose 1.12 million to a record high 45.91 million in the just-ended business year.