Are there many retail investors in Japan? What is their investment style? Do they also tend to chase rising stocks and sell declining ones?

Hey, talking about Japanese retail investors, that's a pretty interesting topic. Just like here, they're also a force to be reckoned with in the stock market. Let me break it down for you.

First, the Numbers: Are there many Japanese retail investors?

Conclusion: Very many, and growing at an unprecedented pace.

You might find it strange. Wasn't the Japanese economy in a "lost three decades"? Why are so many people still trading stocks? We need to look at this in two phases:

1. The Past: Savings Reigned Supreme For a long time, Japanese people weren't big on stocks. After the bubble economy burst in the 90s, the stock market languished, and everyone got scared. Plus, even though bank interest rates were low, at least the principal was safe. So, the vast majority preferred to keep their money in the bank or buy government bonds for peace of mind. Back then, while the absolute number of retail investors wasn't small, their proportion of the total population wasn't particularly high.

2. Now: The Whole Nation Rushes to the Market Things have changed dramatically in recent years, mainly for several reasons:

   • The Push of "Abenomics": A series of economic stimulus policies by former Prime Minister Shinzo Abe pulled the Japanese stock market out of a long bear market, creating a profit effect that attracted people back.
   • Zero/Negative Interest Rates: Money in the bank earns almost no interest, and you might even pay fees to keep it there, forcing people to seek other investment channels.
   • The New NISA System (The Game Changer): This is the most crucial point! Think of it as a "supercharged tax-free stock trading account." Starting in 2024, every Japanese person has an annual investment allowance of up to 3.6 million yen (about 170,000 RMB). Profits made from buying stocks or funds within this allowance are completely tax-free! And this account is lifelong. This policy directly ignited nationwide investment enthusiasm. Countless housewives, office workers, and young people who never touched stocks before are opening accounts and entering the market.

So, if you ask now, are there many Japanese retail investors? The answer is: Yes, and the number of new accounts is still exploding.

Now, the Style: How do they like to play?

The investment style of Japanese retail investors can be described as "a blend of East and West, coexisting old and new schools," and it's quite distinctive.

• The Legend of "Mrs. Watanabe" This is a classic international image of Japanese retail investors. It specifically refers to housewives who control the household finances and like to trade in the international forex market. Their style is typically conservative, favoring high-yield currencies, and using leverage. However, this image is a bit dated now; today's "Mrs. Watanabes" are also heavily investing in stocks and funds.

• A Peculiar Love for "Kabunushi Yūtai" (Shareholder Perks) This is a very unique culture in the Japanese stock market – the shareholder perks system. Simply put, if you buy shares in a company, besides potential dividends, the company will periodically send you some "small gifts," such as:

  • Buy shares in a restaurant chain? Get a bunch of free meal vouchers.
  • Buy shares in a food company? Get a big box of the company's products.
  • Buy shares in a railway company? Get free travel passes.
  • Buy shares in a cinema chain? Get free movie tickets.

  For many retail investors, the primary goal isn't stock price appreciation, but to get these tangible benefits. This investment style is very "homely," pursuing a sense of satisfaction from "getting a good deal," and can be described as very laid-back and conservative.

• Loyal Fans of Traditional Blue-Chip Stocks Like retail investors in many countries, most Japanese retail investors also prefer well-known large companies they are familiar with, such as Toyota, Sony, Nintendo, Mitsubishi Corporation, etc. Buying shares in these companies makes them feel secure, less likely to "step on a landmine."

• The New Generation's Short-Term Speculation Of course, where there are conservatives, there are also the aggressive. With the proliferation of online brokers (like SBI Securities, Rakuten Securities) and increasingly lower trading commissions, a large number of young short-term traders have emerged. They prefer chasing hot themes, like semiconductors, AI, anime IP, etc. Their trading frequency is high, and their style resembles the momentum trading and hot topic chasing seen among speculators here.

Finally, "Chasing Rallies and Selling Dips": Human Nature is Universal

Answer: Of course they do! And they are just as prone to it as retail investors anywhere else.

"Chasing rallies and selling dips" is an instinctive reaction rooted in human "greed" and "fear," a tendency that retail investors worldwide find hard to avoid.

• Chasing Rallies (FOMO - Fear Of Missing Out) The Nikkei 225 hitting a record high this year after 34 years is the perfect example. When the media reports daily that "the stock market hit a new all-time high!", masses of individual investors rush into the market fearing they'll "miss out." A lot of new account funding pours in at times like this – classic "chasing the rally." When a concept (like the previously hyped "all-solid-state batteries") gets hot, related stocks are also swarmed by retail investors, rapidly pushing prices up in the short term.

• Selling Dips (Panic Selling) Similarly, at the slightest market disturbance – like bad news from the US, or rumors of a change in Bank of Japan policy – retail investors are also the quickest to panic. They often lack the strong research teams and psychological resilience of institutional investors. Seeing stock prices fall, they fear asset shrinkage and rush to sell, thereby exacerbating the market decline.

To summarize:

Japan's retail investor base is large and rapidly growing. Their investment styles are diverse, ranging from "laid-back" investors buying stocks for free meal coupons to "technical" traders enthusiastic about short-term battles. But regardless of the external style, during sharp market fluctuations, they, like retail investors everywhere, struggle to escape the human weakness of "chasing rallies and selling dips."