It is easy to understand why Japanese investors are buying foreign bonds. Japanese bonds don't yield anything. It is a little harder to understand why foreign investors have been buying so many Japanese bonds.
cfr.org/blog/puzzle-ja…
cfr.org/blog/puzzle-ja…
Equal two-way bond flows for Japan is the kind of thing that makes total sense to those who live in certain parts of the fx and bond market (those supplying Japanese investors with dollars get yen and they have to be invested somewhere) but very little sense to anyone else ... 
And to be honest before I started looking into it, I would have guessed that Japanese demand for foreign bonds (a portfolio outflow) would have been the counterpart to a meaningful share of Japan's current account surplus ...
A hedged outflow tho is matched by an inflow, so doesn't generate a net flow (the net outflow from Japan is mostly FDI right now). Gross positions increase (something that Hyun Shin has highlighted) even tho the net doesn't change ...
And yes, there is a Taiwan angle too. The absence of a comparable inflow into Taiwan is one of many indicators that suggest that Taiwan's hedging market is, umm, somewhat unique ...
cfr.org/blog/130-billi…
cfr.org/blog/130-billi…
