Market views· Sector Analyst
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The Japanese market exhibits distinct risk-off sentiment, with defensive sectors significantly outperforming cyclical sectors relative to the benchmark. The average relative strength (RS) of defensive sectors stands at +8.94%, compared to +1.66% for cyclical sectors, resulting in a spread of -7.28%. While overall sector momentum is accelerating with an average of +8.12%, capital is primarily flowing into defensive sectors such as real estate, pharmaceuticals, and transportation. Inter-sector correlation remains low at 0.486.
Action: Investors should increase exposure to defensive sectors and reduce exposure to cyclical sectors, particularly export-oriented industries, to reflect current risk-off sentiment.
| # | Type | |||||
|---|---|---|---|---|---|---|
| 1 | Real Estate 1633.T | DEF | +14.25% | +18.77% | +2.88% | +16.91 |
| 2 | Retail 1630.T | CYC | +13.91% | +16.42% | +10.84% | +13.19 |
| 3 | Pharmaceutical 1621.T | DEF | +13.37% | +22.35% | +10.24% | +10.66 |
| 4 | Transportation 1628.T | DEF | +12.84% | +20.06% | +11.34% | +16.62 |
| 5 | Automobile 1622.T | CYC | +11.72% | +17.74% | +12.88% | +10.78 |
| 6 | Electric Power/Gas 1627.T | DEF | +10.90% | +19.11% | +6.00% | +21.76 |
| 7 | Trading/Wholesale 1629.T | CYC | +10.15% | +18.12% | +2.10% | +14.87 |
| 8 | Financials ex-Banks 1632.T | DEF | +8.96% | +15.68% | +8.77% | +13.70 |
| 9 | Construction 1619.T | DEF | +7.32% | +5.65% | −6.81% | +11.41 |
| 10 | Banks 1631.T | DEF | +5.87% | +5.68% | +10.51% | +14.85 |
| 11 | Chemicals 1620.T | DEF | +5.39% | +8.48% | +0.13% | +2.46 |
| 12 | IT/Services 1626.T | CYC | +2.87% | +10.01% | +15.44% | +3.43 |
| 13 | Foods 1617.T | DEF | +1.59% | +6.11% | +1.54% | +0.01 |
| 14 | Energy Resources 1618.T | CYC | −1.30% | +7.07% | −8.62% | +6.55 |
| 15 | Machinery 1624.T | CYC | −4.45% | −7.67% | −16.83% | −3.43 |
| 16 | Electronics 1625.T | CYC | −5.75% | −6.90% | −4.70% | −8.38 |
| 17 | Steel/Nonferrous 1623.T | CYC | −13.90% | −19.08% | −29.21% | −7.32 |
Attractive due to strong relative strength and defensive characteristics amid market risk-off sentiment.
Less sensitive to economic fluctuations, with steady growth expected driven by aging demographics.
Stable returns expected due to high momentum and defensive nature.
Underperformance expected due to sustained decline in relative strength and negative momentum.
Vulnerable to global economic slowdown as an export-oriented cyclical sector.
Severe weakening in industrial demand, evidenced by sharp declines in relative strength across all timeframes.
The Real Estate sector has surged with RS 20d +14.25% and 60d +18.77%, demonstrating strong relative strength across all timeframes. Momentum has also spiked to +16.91%, reflecting investors' preference for defensive assets.
The Retail sector has surged with RS 20d +13.91% and 60d +16.42%, showing strong relative strength despite being a cyclical sector. This positive trend persists amid market risk aversion, supported by TOPIX rebalancing and specific domestic demand factors.
The pharmaceutical sector has surged with RS 20d +13.37% and 60d +22.35%, maintaining consistently strong relative strength. Momentum has also spiked to +10.66%, reinforcing its role as a representative defensive stock driven by aging demographics and digital health trends.
The machinery sector is showing overall weakness, with RS 20d -4.45%, 60d -7.67%, and 120d -16.83%. Momentum has also adjusted to -3.43%, highlighting its vulnerability as a cyclical sector.
The electronics sector continues to underperform, with RS 20d -5.75% and momentum -8.38%. This reflects deteriorating investor sentiment toward export-oriented cyclical sectors.
The steel/non-ferrous metals sector is experiencing severe underperformance, plunging across all timeframes with RS 20d -13.90%, 60d -19.08%, and 120d -29.21%. Momentum has also declined to -7.32%, deepening concerns over slowing industrial demand.
Capital is clearly rotating into defensive sectors amid broad underperformance in cyclical sectors.
Defensive sectors show an average relative strength of +8.94%, significantly outperforming cyclical sectors at +1.66%, resulting in a spread of -7.28%. Top-performing sectors are predominantly defensive, such as Real Estate and Pharmaceuticals, while bottom-performing sectors are mainly cyclical, including Machinery, Electronics, and Steel/Non-ferrous Metals.
Key driver: Potential shifts in Bank of Japan monetary policy, yen exchange rate volatility, and global economic uncertainty are the key drivers.
Sector ETF prices relative to Nikkei 225 from AlphaLenz's daily price database, 15 Nov 2026.