Japanese equities factor geek: Value trap, value deadlock

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Japanese equities factor geek: Value trap, value deadlock

Nomura | Japanese equities factor geek 23 June 2026

We think the main market movers last week were the US–Iran agreement, the BOJ rate

hike, the hawkish FOMC, and verbal intervention. The Nikkei 225 rose above 70,000 for

the first time, and in other asset classes, crude oil prices fell, interest rates rose, and the

yen depreciated. In terms of stock selection, momentum turned risk-on in response to the

US–Iran agreement, and beta and momentum rose around 10% as the market was

strongly driven by AI and semiconductors.

Last week, despite declines in crude oil prices, sentiment on equity markets was

risk-on, and AI and semiconductor-related stocks that are momentum and growth

stocks (the other side of the coin) were bought up, placing value stocks in a

deadlock

By contrast, value factors, which had been weak since the start of the conflict in Iran

because of the negative impact of rising crude oil prices, fell around 5% last week despite

declines in crude oil prices. We attribute this to strong performance by growth-related

stocks (the other side of the coin) such as those related to AI and semiconductors, and

the fact that crude oil prices have fallen but are still higher than the pre-Iran war level of

around $60/bbl. From the perspective of two-stage sorting, value and reversal stocks (

Figure3), which include many stocks negatively affected by high crude oil prices, showed

a 2.9% decline in performance, while growth and momentum stocks (Figure4), which

include many AI and semiconductor-related stocks, showed a 9.4% rise (Figure8; B/P

and historical 12M return). As mentioned above, we think it is important to be aware of the

risk that, as happened last week, value and reversal stocks could find themselves in a