Market views· Sector Analyst
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The Japanese market currently reflects strong risk-off sentiment, with defensive sectors significantly outperforming cyclical sectors in an ongoing rotation. The average relative strength of defensive sectors stands at +9.30%, compared to +4.61% for cyclical sectors, resulting in a spread of -4.69%. This indicates clear concerns over an economic slowdown and a pronounced preference for safe-haven assets.
Action: Given the distinct capital shift toward defensive sectors, a conservative portfolio strategy is required, involving overweighting defensive sectors and underweighting cyclical sectors.
| # | Type | |||||
|---|---|---|---|---|---|---|
| 1 | Pharmaceutical 1621.T | DEF | +16.91% | +12.32% | −1.51% | +23.86 |
| 2 | Real Estate 1633.T | DEF | +13.45% | −0.28% | −18.31% | +22.39 |
| 3 | Retail 1630.T | CYC | +13.41% | +2.32% | −0.61% | +20.67 |
| 4 | Automobile 1622.T | CYC | +12.70% | +2.58% | −0.68% | +22.62 |
| 5 | Energy Resources 1618.T | CYC | +12.67% | +12.84% | −0.28% | +16.60 |
| 6 | Foods 1617.T | DEF | +12.55% | +5.68% | +4.70% | +19.38 |
| 7 | Transportation 1628.T | DEF | +12.54% | +6.15% | +1.26% | +18.17 |
| 8 | Financials ex-Banks 1632.T | DEF | +11.52% | +1.99% | +8.52% | +17.70 |
| 9 | Trading/Wholesale 1629.T | CYC | +9.57% | +6.68% | −8.19% | +12.69 |
| 10 | IT/Services 1626.T | CYC | +8.11% | +12.50% | +11.85% | +12.20 |
| 11 | Chemicals 1620.T | DEF | +6.92% | +3.15% | −2.73% | +10.97 |
| 12 | Electric Power/Gas 1627.T | DEF | +6.81% | +5.69% | −6.47% | +11.53 |
| 13 | Construction 1619.T | DEF | +2.51% | −5.53% | −20.36% | +6.58 |
| 14 | Banks 1631.T | DEF | +0.48% | −1.15% | +7.16% | +4.54 |
| 15 | Machinery 1624.T | CYC | −2.82% | −8.08% | −24.75% | −0.93 |
| 16 | Electronics 1625.T | CYC | −3.81% | −4.44% | −5.44% | −4.21 |
| 17 | Steel/Nonferrous 1623.T | CYC | −12.97% | −9.11% | −36.44% | −10.41 |
Maintains market leadership supported by strong relative strength and momentum.
Inflows of defensive capital are confirmed by a recent sharp improvement in relative strength and strong momentum.
A representative defensive sector maintaining stable relative strength and momentum.
Experiencing worsening underperformance with severe relative weakness and negative momentum across all timeframes.
Displays the most significant relative weakness and plunging momentum, indicating vulnerability to an economic slowdown.
Both relative strength and momentum are negative, reflecting concerns over an economic slowdown.
This sector is leading the market with strong relative strength and momentum across all timeframes, recording RS 20d +16.91%, 60d +12.32%, and momentum +23.86%. As a representative defensive sector, it suggests sustained capital inflows amid current risk-averse market sentiment.
With RS 20d +13.45% and momentum +22.39%, this sector has entered the top tier, displaying very strong short-term relative strength and momentum. Although medium- to long-term RS was weak, it has shown a sharp recent improvement, indicating defensive capital inflows.
With a 20-day RS of +13.41% and momentum of +20.67%, the sector demonstrates strong short-term relative strength and momentum, ranking in the top tier. Although medium- to long-term RS was weak, it has recently shown signs of recovery, indicating outperformance relative to the market.
Recording a 20-day RS of -2.82%, 120-day RS of -24.75%, and momentum of -0.93%, the sector exhibits severe relative weakness across all timeframes. Notably, it has plunged in the long term, and negative momentum signals further downside risk.
With a 20-day RS of -12.97%, 120-day RS of -36.44%, and momentum of -10.41%, the sector is experiencing the most severe underperformance relative to the market in both short- and long-term horizons. Momentum has also plunged sharply, keeping the sector at the bottom of rankings, indicating it is most exposed to economic slowdown concerns.
The Japanese market is currently experiencing a clear capital rotation from cyclical to defensive stocks.
The Cyclical vs. Defensive spread stands at -4.69%, indicating defensive stocks are outperforming. Defensive sectors such as Pharmaceuticals and Real Estate dominate the top-performing sectors, while cyclical stocks like Machinery and Steel/Nonferrous occupy the bottom. Overall sector momentum is accelerating with an average of +12.02%, though this appears driven by the strength of defensive sectors.
Key driver: Concerns over economic slowdown and the resulting risk-averse sentiment among investors are the key drivers.
Sector ETF prices relative to Nikkei 225 from AlphaLenz's daily price database, 1 Nov 2026.