November 10, 2017

Are the Tides Turning for Japanese Funds?

by Tom Roseen.

Japanese stocks have rallied over the last few weeks, bolstered by strong corporate earnings and the yen’s weakness; the Nikkei 225 posted plus-side returns for each of the last six weeks. After Prime Minister Shinzo Abe’s coalition easily won a majority in Japan’s snap parliamentary election on October 22, seen as a boon for Japanese stocks, Japanese markets got an extra turbo boost.

However, year to date through Thomson Reuters Lipper’s fund-flows week ended November 8, 2017, the Japanese Funds classification has witnessed net redemptions of $785 million, despite the average fund returning 25.65% over the same period (although lagging other classifications of the region: Pacific ex-Japan Funds [+37.42%], China Region Funds [+42.98%], and India Region Funds [+34.92%]).

Estimated net flows into Japanese Funds, however, recently turned positive, with net inflows for each of the last five weeks. While for Q3 2017 the classification continued to suffer net redemptions, handing back some $2.5 billion, for the first month and several days of Q4 Japanese Funds has attracted $1.9 billion net. For the most recent fund-flows week, Japanese Funds attracted $758 million, its largest weekly net inflows since the week ended March 15, 2015.

While a five- to six-week run doesn’t make a trend, Abe’s recent consolidation of power and his continued focus on easy monetary policy, fiscal stimulus, and structural reform—accompanied by strong earnings reports among many Japanese stocks—bears watching.

Thomson Reuters Lipper delivers data on more than 265,000 collective investments in 61 countries. Find out more.

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