The stimulus package introduced by Japan’s Prime Minister Shinzo Abe has helped to propel Japan, the world’s third-largest economy, to end the last trading day of 2013 with the Nikkei 225 index closing at 16,291.31 points, recording an impressive 57% increase in 2013, marking the index’s biggest annual gain since 1972.
Based on our analysis of the ETF/ETP industry in Japan through the end of November 2013, it has seen a similar growth pattern with the assets under management (AUM) increasing by 56.7% from U.S. $49 billion to U.S. $77 billion. At the end of November 2013, the Japanese ETF/ETP industry had 128 ETFs/ETPs, with 166 listings, assets of U.S. $77 billion, from 17 providers on 3 exchanges.
The compounded annual growth rate (CAGR) in AUM in the ETF/ETP industry in Japan over the prior 10 years was just 8.9%. Just 5 years ago, at the end of 2008 the AUM in ETFs/ETPs in Japan was just U.S. $28 billion.
Year-to-date through the end of November 2013, ETFs/ETPs in Japan had net inflows of U.S. $14.7 billion which was significantly above the U.S. $9.7 billion of net inflows at the same time in 2012. The majority of the net inflows U.S. $13.5 billion went into Equity products.
The top 20 ETFs account for 97.7% of Japanese ETF assets. The largest ETF: Nomura Nikkei 225 ETF on its own accounts for 23.5% of assets. 19 of the top 20 ETFs track equity indices while 1 provides exposure to alternative asset class indices. Year-to-date through the end of November the top 20 ETFs have collectively gathered U.S. $14.6 billion in net new assets. 19 of the top 20 ETFs track equity indices while 1 provides exposure to alternative asset class index.
Nomura AM is the largest ETF/ETP provider in terms of assets with U.S. $36 billion, reflecting 47.3% market share; Nikko AM is second with U.S. $17 billion and 22.1% market share, followed by Daiwa with U.S. $17 billion and 22.0% market share. The top three ETF/ETP providers, out of 17, account for 91.4% of Japanese ETF/ETP assets, while the remaining 14 providers each have less than 7% market share.
ETFs assets are also growing when compared to mutual fund assets in Japan. At the end of 2008 ETF assets accounted for approximately only 4% of mutual fund assets having grown to 7.1% of mutual fund assets at the end of Q1 2013.