Overseas stocks dominate the top 10 investment trust funds purchased under a new tax exemption program for small-lot investors in Japan, leading to an outflow of money abroad, an Asahi Shimbun survey found.
The trend puts pressure on the yen to weaken and heightens the risk of currency fluctuations impacting household finances, experts said.
The Asahi Shimbun surveyed 10 securities firms about their sales from January to June, including five leading brokerages in Japan: Nomura Securities Co.; Daiwa Securities Co.; SMBC Nikko Securities Inc.; Mizuho Securities Co.; and Mitsubishi UFJ Morgan Stanley Securities Co.
The other five are online brokerages: Rakuten Securities Inc.; SBI Securities Co.; MONEX Inc.; Matsui Securities Co.; and au Kabucom Securities Co.
Investment trusts, which move in line with overseas stock prices and track global stock markets or U.S. stock indices, such as the S&P 500, ranked highly across the board.
Many of these funds invest in U.S. stocks, which continue to perform well. Shares offering high dividends and low management fees are particularly popular.
Japanese household and individual investments have increased under the new NISA (Nippon Individual Savings Account), which offers permanent tax exemption for small investments and was introduced in January.
According to data compiled by the Japan Securities Dealers Association, the total purchase amount in NISA accounts at the 10 firms between January and June reached 7.5 trillion yen ($51.6 billion).
The top 10 investment trusts alone accounted for around 2.7 trillion yen of the total, according to the Asahi survey.
Besides the top 10 funds, many people have purchased other funds that invest in foreign stocks, fueling the outflow of money overseas.
Many individual investors regularly purchase a fixed amount every month, which puts pressure on the yen to weaken.
The most purchased fund was “eMAXIS Slim all country” managed by Mitsubishi UFJ Asset Management Co. New NISA accounts have pumped more than 1 trillion yen into the fund over the six-month period.
However, on Aug. 5, when the Nikkei 225 index plummeted, the fund’s net asset value fell by 4.9 percent due to the global stock market decline and strengthening yen.
On that day, the amount of redemptions far exceeded purchases.
Japanese investments in overseas stocks can also lose value when the yen strengthens.
The new NISA features an “accumulation investment” category for regular purchases of investment trust funds and a “growth investment” category” that allows for purchases of individual stocks.
The most purchased individual stock was NTT Corp., with 137.9 billion yen invested from NISA accounts.
NTT announced a 25-for-1 stock split in May 2023 to make its shares more affordable.
Among overseas individual stocks, U.S. semiconductor giant Nvidia Corp. was the most popular.
“With the trade deficit continuing and the yen remaining on a downward trend, holding only yen carries the risk of losing asset value,” said Hideki Shibata, senior strategist at Tokai Tokyo Intelligence Laboratory Co. “So, investing in funds focused on U.S. stocks has become a significant option for individuals.”
He pointed out, “As a result, currency fluctuations will also have a major impact on individual asset formation.”
(This article was written by Kohei Higashitani and Toshiki Horigome.)
