Japan Small & Mid-Cap Sector: Retail investors and share prices

Research evidence excerpt

Japan Small & Mid-Cap Sector: Retail investors and share prices

Global Research

29 July 2026ab

Japan Small & Mid-Cap Sector Equities

JapanRetail investors and share prices

Industrial

Mariko Watanabe

Performance: Reverse financial market in Japan, small caps rise in US Analyst

In July to date, trading value has increased, value has outperformed growth, and price mariko.watanabe@ubs.com

momentum has seen worsening performance, marking a shift from trends seen the +81-3-5208 6297

Nikkei 225, which had risen the most from April to June, has fallen in July following a Lihui Huang

decline in the SOX. The TSE Growth Index also booked sluggish performance in July. The Analyst

MSCI World Small Cap gained 13% in April-June, with the US posting the strongest lihui.huang@ubs.com

gains, while Europe and Asia underperformed. Amid rotation into cyclical stocks in the +81-3-5208 6217

US, the Russell 2000 has markedly outperformed the S&P 500 thus far in 2026. Noritaka Tsutsumi, CFA

Historically, Japanese and US small caps have shown a high correlation, but the TPX Analyst

Small Index is unlikely to rise in the current environment. noritaka.tsutsumi@ubs.com

+81-3-5208 6221

Equity supply and demand: Elevated trading turnover amid greater speculative Masae Nakazono

demand Associate Analyst

Trading value reached a record high in June, but appears to have peaked for now. Retail masae.nakazono@ubs.com

+81-3-5208 6257

investors’ margin trading accounted for 25% of TSE trading, while trading turnover also

hit a record 25X (5X/week). Historically, sharp increases in margin trading by retail

investors have tended to be followed by market corrections. The TSE short-selling ratio

fell to its lowest level in the past 10 years on 22 July, before rising slightly in July. Market