Japan equity quant memo

Research evidence excerpt

Japan equity quant memo

Global Markets Research

Japan equity quant memo 30 June 2026

EQUITY: EQUITY QUANTITATIVE RESEARCH

Research AnalystsNotable preference for "safe" momentum and growth

Japan quantitative research

Concerns about financial soundness could bring a turning point for Makoto Furukawa - NSC

market overconcentration; beginning of the end may now be in sight makoto.furukawa@nomura.com +81 3 6703 1174

Change in quality factor trends: Excess returns on low-quality stocks flat since Shin Nishioka - NSC

April despite high share price momentum shin.nishioka@nomura.com

In our 8 June 2026 report Japanequityquantmemo-Signsofchangeinsafetyindicator +81 3 6703 3948

trends, we noted that the positive trend in D/E ratio factor returns had been strengthening Shunta Tachinaka, CFA - NSC

since the second half of April, and that the current market environment, in which share shunta.tachinaka@nomura.com

price momentum and beta have substantially positive returns, may not be a +81 3 6703 1212

straightforward risk-on phase.

If we look at recent quality factor returns, including safety indicators (Figure1), we see

that returns for D/E ratio, liquidity ratio (liquid assets/liquid liabilities), and accruals have all

turned upward recently. In other words, in the recent market environment dominated by

overconcentration in AI-related stocks, investors have also increasingly favored stocks

judged to have relatively high safety. If we look at long-term trends for these factors for

reference (Figure2), we see that while D/E ratio and liquidity ratio have shown relatively

similar trends, accruals have tended to move somewhat differently. Recently, however,

these have all been positive at the same time.

Figure3 through Figure8 show excess returns on two-stage sorted portfolios by these