As the Nikkei 225 fell sharply in July, inflows into Japan equity funds reached high levels, with demand growing for both index and active funds. The article examines fund flows driven by both short-term opportunities and long-term investment.
The stock market in July 2026 was volatile amid geopolitical risks and concerns over overheating in AI-related stocks, and the Nikkei 225 recorded a sharp monthly decline. The TOPIX, however, edged higher, and individual investors increased fund flows aimed at capturing these short-term price movements.
In July, open-ended stock investment trusts recorded approximately ¥2.7 trillion in inflows excluding ETFs, approaching record levels. Foreign equity funds attracted the most capital, at approximately ¥1.7 trillion, followed by Japan equity funds at approximately ¥560 billion. Inflows into Japan equity funds showed a pattern similar to that seen during the market’s sharp decline in March 2026.
Of the approximately ¥560 billion in total July inflows into Japan equity funds, approximately ¥290 billion flowed into index funds and approximately ¥270 billion into active funds. Flows into Nikkei 225-linked index funds supported a tendency to seek short-term trading gains.
Japan equity active funds recorded inflows of approximately ¥270 billion in July as well, suggesting that long-term capital continued to flow into the category. Against the backdrop of several large new fund launches, the market appears to retain a strong “bullish” stance toward Japanese equities over the long term.