In the week ending May 28, Japanese equity funds recorded net outflows of $7.49 billion, the largest weekly withdrawal since July 2007, according to LSEG Lipper data.
The sell-off was largely driven by domestic investors, who pulled $7.55 billion from local funds. In contrast, foreign investors added $59 million, suggesting a divergence in sentiment.
🔎 Key drivers behind the outflows:
– Profit-taking after April’s dip and May’s rebound.
– Rebalancing by large Japanese insurers and pension funds shifting from equities to bonds.
– A 10% appreciation of the yen this year, weighing on exporters’ earnings potential.
– Earnings outlook weakening: Analysts have downgraded 12-month forward earnings estimates by 1.8% over the past month.
ETFs like Daiwa iFreeETF TOPIX (1305.T), Nikko Listed Index Fund TOPIX (1308.T), and Nomura NF TOPIX ETF (1306.T) saw the biggest redemptions—$2B, $1.92B, and $1.61B respectively.
📌 While Japan continues making strides in corporate governance, analysts believe these reforms are long-term drivers rather than near-term catalysts, as Japan’s ROE still lags other major markets.
