Feb 22 (Reuters) -

Foreign investors continued buying Japanese shares in the week ended Feb. 16, rallying behind the domestic stock market as it marched towards an all-time peak on optimism over corporate reforms and lower valuations. According to exchange data, foreigners acquired 111.26 billion yen ($740.60 million) worth of Japanese stocks on a net basis in the week to Feb. 16, after buying about 817.43 billion yen on a net basis in the previous week.

They continued buying cash equities for a seventh successive week, pumping in about 301.39 billion yen during the week on a net basis.

However, they sold around 190.13 billion yen of derivatives contracts, partly reversing 451.06 billion yen of net purchases in the previous week.

Japanese stocks touched a record peak on Thursday, breaking levels last seen in 1989 during the halcyon days of the bubble economy.

In the bond market, foreign investors unloaded a massive 1.83 trillion yen of Japanese short-term bonds, the largest weekly net disposal since Jan. 26, as per data from the Ministry of Finance.

Long-term Japanese bonds also saw significant outflows, with foreigners withdrawing a net 521.6 billion yen, the highest since Dec. 22, 2023.

Concurrently, Japanese investors offloaded about 560.8 billion yen of long-term foreign bonds, ending a three-week buying trend.

Yet, they continued to increase their holdings in short-term securities for the fourth consecutive week, with net purchases of 290.9 billion yen.

Domestic players also remained active in foreign equities, acquiring approximately 359.9 billion yen of stocks last week, marking their second straight week as net buyers. ($1 = 150.2300 yen)

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Sonia Cheema)