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Japanese stocks attract biggest inflows in seven week, BAML says

LONDON, Nov 3 (Reuters) - Investors shovelled $3.4 billion into Japanese stocks, the biggest inflows in seven weeks, data from Bank of America Merrill Lynch (BAML) showed on Friday, as they looked for a pick-up in domestic demand and prospects for an expansionist budget.

The Nikkei powered to 21-year highs this week on the back of foreign investor inflows, with the market up almost 18 percent year-to-date.

Long shunned by investors, Japan now looks attractive as domestic demand strengthens, driving Japanese growth to an annualised 2.5 percent in the second quarter, its sixth straight quarter of expansion .

Shinzo Abe, who was re-elected as prime minister on Wednesday after his ruling bloc's big election win, wants his cabinet to compile an extra budget to support his expansionist economic agenda.

Abe's victory has also heightened expectations that the Bank of Japan's ultra-loose policy - a key pillar of his "Abenomics" stimulus policies - will continue.

The $3.4 billion that went into Japan represented the lion's share of the equity inflows. In total, global stocks attracted $5 billion, according to the weekly data, which runs from Wednesday to Wednesday.

Emerging markets attracted $300 million, but U.S. equities lost $1.2 billion and European stocks lost $500 million.

But tech stocks remained in favour, pulling in $600 million, with the tech sector up almost 36 percent year-to-date. Apple shares rose to a record high this week after positive reviews of its much-anticipated iPhone X .

The bank's analysts noted that markets had shrugged off the Bank of England's first rate increase since 2007. But it said the risk of volatility in the fourth quarter remained, citing the potential for a surprise in U.S. non-farm payrolls data due out later on Friday.

Bonds attracted $6.9 billion, with investment-grade corporate bond funds pulling in $7.8 billion and emerging market debt funds $700 million.

But low-yielding government and Treasury bond funds lost $1.2 billion in the week, with Treasuries suffering their biggest four-week outflows since March 2017.

(Reporting by Claire Milhench, editing by Larry King)