A new SGX gateway into the Nikkei 225, putting Japan’s investment opportunities at your doorstep

• Why Japan: Japan’s economic regime is shifting towards more sustainable inflation and wage growth, alongside BOJ policy normalisation. At the same time, corporate reforms are improving shareholder returns, while Japan’s leading role in the semiconductor supply chain provides exposure to the global AI investment cycle.
  
• Nikkei 225 offers targeted technology exposure: Compared with the broader, financials-heavy TOPIX, the Nikkei 225 has significantly greater exposure to semiconductor leaders such as Advantest and Tokyo Electron.
  
• SGX makes Japan more accessible: iFAST, in partnership with DWS Asset Management, is launching the iFAST Xtrackers Nikkei 225 UCITS Index ETF (SGX: JPY) — the first SGX-listed ETF to track the Nikkei 225 Index.
  
• The new ETF offers SGD trading, a SGD 1 issue price, one-unit board lot and an estimated 0.43% expense ratio, with SRS eligibility after listing, lowering practical barriers for Singapore investors seeking Japan exposure.
  
• The IOP runs from 1 to 14 October 2026, with its official SGX listing on 22 October 2026.

Few markets have captured investors’ attention like Japan. The Nikkei 225 gained 12.1% in 2024 and 22.0% in 2025, before surpassing the 70,000 level for the first time in June 2026. Even after a subsequent pullback, the index remained near record highs, trading around 66,753 at the end of September 2026, up roughly 33.1% year to date (All returns in SGD terms).

After such a strong run, the question naturally on investors’ minds is: Does Japan’s rally still have room to run?

Japan: A market where structural reform meets structural growth

Japan’s equity story is no longer built on a single catalyst. A healthy inflation and wage cycle is reshaping the domestic economy, corporate reforms are unlocking shareholder value, and Japan’s critical position in the global semiconductor supply chain provides a structural growth engine.

Japan has entered a new inflation and monetary-policy regime

Japan has moved beyond its long-standing deflationary environment into a more sustainable inflationary regime. While imported energy costs initially contributed to price pressures, inflation has broadened to domestic factors, supported by rising wages, services prices and resilient consumer demand. Core-core inflation, which excludes fresh food and energy, remained at 1.9% YoY in August, while real wages stayed positive during the first seven months of 2026, providing further support to household consumption.

This healthier inflation backdrop has allowed the Bank of Japan (BOJ) to progressively normalise monetary policy. On 18 September 2026, the BOJ raised its policy rate by 25 basis points to 1.25%, the highest level since 1995. While subsequent moves will remain data-dependent, we believe the broader direction remains towards further normalisation as underlying inflation stays close to the BOJ’s 2% target and economic conditions remain resilient.

Why does this matter for equities? Japan spent decades operating in an environment where weak pricing power constrained nominal revenue growth and encouraged companies to hoard cash. A moderate inflation and wage cycle changes that equation. Greater pricing power can support nominal revenues and earnings, while higher wages can reinforce consumption and domestic demand. This provides a healthier foundation for corporate profitability.

Corporate reform is turning stronger earnings into shareholder returns

Perhaps the most compelling structural change is taking place within corporate Japan itself. Japanese companies are increasingly being pushed to make their balance sheets work harder. Share buybacks are rising, cross-shareholdings are being unwound, and management teams are placing greater emphasis on capital efficiency and return on equity (ROE). These efforts are increasingly visible in the numbers: the Nikkei 225’s ROE improved from 10.8% at the end of December 2025 to 13.1% at the end of September 2026. This provides tangible evidence that Japan’s corporate reforms are translating into better capital efficiency rather than remaining simply a governance exercise.

Crucially, these reforms are occurring alongside a strong earnings cycle. Nikkei 225 companies recorded aggregate earnings growth of 69% YoY in the quarter ended 30 June 2026, providing companies with greater cash flow to reinvest in their businesses or return capital to shareholders. According to Nikkei estimates, dividends from Tokyo Stock Exchange-listed companies are expected to rise by around 6% for the year ending 31 March 2027, potentially marking a sixth consecutive record high.

And the reform agenda is still evolving. Japan’s Corporate Governance Code was revised again in July 2026, placing greater emphasis on stronger board oversight and encouraging companies to articulate credible medium- to long-term strategies for sustainable value creation. The focus is increasingly moving beyond simple cost-cutting towards improving business models, capital allocation and long-term returns on invested capital.

That distinction matters for investors. Better governance alone does not guarantee higher share prices, but when combined with stronger earnings and more disciplined capital allocation, it creates the potential for higher ROE, stronger shareholder distributions and, over time, a re-rating of Japanese equity valuations.

Japan is a critical enabler of the global AI infrastructure cycle

Japan also offers something that many developed markets cannot: deep exposure to the physical infrastructure behind the global AI investment boom.

Japan may not dominate the production of AI GPUs, but it plays an irreplaceable role further upstream in the semiconductor value chain. Advanced chips cannot be produced at scale without sophisticated wafer-fabrication equipment. Tokyo Electron, SCREEN Holdings and Kokusai Electric hold important positions in semiconductor manufacturing equipment, while Advantest is a global leader in automated semiconductor testing. Japan is also a critical supplier of semiconductor materials, specialty chemicals, substrates and components used in advanced manufacturing and packaging.

As hyperscalers continue to expand data-centre capacity, chipmakers must invest alongside them in wafer fabrication, advanced packaging and testing capacity. Every additional wave of AI infrastructure investment therefore creates demand across a much broader semiconductor ecosystem — and Japanese companies sit at several critical points along that value chain.

A market where structural reform meets structural growth

Japan today sits at the intersection of three powerful structural forces: a healthier inflation and wage regime, corporate reforms that are translating stronger earnings into shareholder value, and rising global investment in AI and semiconductors.

More importantly, these drivers reinforce one another. A healthier nominal economy supports corporate revenues; stronger earnings and governance reforms improve capital efficiency and shareholder distributions; and Japan’s semiconductor leadership adds a global growth engine that is not solely dependent on the domestic economy.

This is why we believe Japan’s equity story extends beyond the strong rally already seen. Japan is no longer simply a turnaround story. For long-term investors, that combination continues to make Japan an appealing market to consider.

Bringing Japan closer to Singapore investors

Despite the attractions of Japan, accessing the market has historically been less straightforward for Singapore investors. Investors buying Japanese shares directly through the Tokyo Stock Exchange generally need access to an overseas brokerage platform and exposure to the Japanese yen. Alternatively, investors can use UCITS ETFs listed on European exchanges, but these may involve foreign-currency trading and European market hours.

That is about to become more convenient. iFAST and DWS Asset Management are collaborating to launch the iFAST Xtrackers Nikkei 225 UCITS Index ETF, which is expected to be the first ETF tracking the Nikkei 225 to list on SGX. The ETF will be available during its Initial Offering Period (IOP) from 1 October to 14 October 2026 via iFAST, with a targeted listing date of 22 October 2026.

Table 1: iFAST Xtrackers Nikkei 225 UCITS Index ETF — IOP details

ETF Name	iFAST Xtrackers Nikkei 225 UCITS Index ETF
Reference Benchmark	Nikkei 225 Index
Issue Price	SGD 1 per share
Initial Offer Period (IOP)	1 Oct to 14 Oct 2026
Target Listing Date	22-Oct-26
Base Currency	SGD
Trading Currency	SGD
SGX Code	SGX:JPY
Trading Board Lot Size	1 Share
Management Fee	0.25% p.a.
Total Expense Ratio	0.43% p.a.
Distribution Policy	Accumulating
Classification Status	Excluded Investment Product
Subscription Mode	Cash is eligible during the IOP, while SRS eligibility will commence after listing.
Source: iFAST Compilations. Data as of 30 Sept 2026.

Why invest in Japan through the Nikkei 225?

The new ETF is particularly interesting because it tracks the Nikkei 225 rather than TOPIX.

The Nikkei 225 is Japan’s most widely quoted equity index and consists of 225 constituents. It is price-weighted and it means companies with higher adjusted share prices have a greater influence on index movements, regardless of their overall market capitalisation. The result is an index with a meaningful tilt towards technology, semiconductor and other growth-oriented companies. Advantest, Tokyo Electron, Fast Retailing, SoftBank Group, Ibiden, TDK and Kioxia are among its largest constituents (Table 2).

TOPIX takes a fundamentally different approach. It is market-capitalisation weighted and covers a much broader universe of Japanese companies listed on the Prime Market. Its greater breadth gives it a more balanced representation of Japan’s corporate sector. While Tokyo Electron and Advantest are also among its top 10 constituents, they account for just 3.9% of the index in aggregate, compared with their significantly larger combined weighting in the Nikkei 225.

Neither methodology is inherently better; they simply provide different forms of exposure to Japan. However, given our constructive view on the semiconductor sector and Japan’s critical role in the increasingly digitalised global economy, investors seeking to participate in the global semiconductor and AI investment cycle may find the Nikkei 225 a more targeted way to gain exposure to these structural growth themes.

Table 2: Top holdings of Nikkei 225 and TOPIX

Nikkei 225	Weight	Sector
Advantest	12.3%	Information Technology
Tokyo Electron	8.6%	Information Technology
Fast Retailing	8.3%	Consumer Discretionary
Softbank Group	7.4%	Communication Services
Recruit Holdings Ltd	2.5%	Industrials
Ibiden Ltd	2.4%	Information Technology
TDK	2.3%	Information Technology
Kioxia Holdings	2.0%	Information Technology
KDDI	1.8%	Communication Services
Kyocera	1.5%	Information Technology
TOPIX	Weight	Sector
Mitsubishi UFJ Financial Group	4.0%	Financials
Sumitomo Mitsui Financial Group	2.6%	Financials
Toyota Motor Corp	2.6%	Consumer Discretionary
Hitachi Ltd	2.5%	Industrials
Sony Group Corp	2.2%	Consumer Discretionary
Tokyo Electron	2.1%	Information Technology
Softbank Group Corp	2.1%	Communication Services
Mizuho Financial Group Inc	2.1%	Financials
Recruit Holdings Co Ltd	2.0%	Industrials
Advantest Corp	1.8%	Information Technology
Source: Japan Exchange Group. Data as of 25 Sept 2026.

The composition difference has also translated into a meaningful performance gap. The Nikkei 225 has outperformed TOPIX over the year to date, one-year, three-year and five-year annualised periods, supported by its greater exposure to semiconductor and technology companies.

Figure 1: Nikkei 225 index outperforms TOPIX

Nikkei 225 performs better than the existing SGX-listed Japan ETF

The new ETF also complements the existing Japan ETF available on SGX: the Lion-Nomura Japan Active ETF (Powered by AI)(SGX: JJJ) and tracks TOPIX as its reference benchmark.

Launched in January 2024, the Lion-Nomura ETF is actively managed and uses proprietary quantitative and AI/machine-learning models to select Japanese equities across sectors and market capitalisations. Its active mandate gives the fund flexibility to deviate from TOPIX and seek additional sources of alpha.

Despite this, its year-to-date and one-year performance has still trailed the Nikkei 225 Index by 6.4% and 5.9% respectively.

Cost is another differentiating factor. The iFAST Xtrackers Nikkei 225 UCITS Index ETF has a management fee of just 0.25% per annum, reflecting its passive investment approach, with an estimated expense ratio of around 0.43%. This compares with a 0.70% management fee for the Lion-Nomura Japan Active ETF, which reported an expense ratio of 0.98% for the financial year ended 31 December 2025. This makes the iFAST Xtrackers ETF 55 basis point more cost-efficient annually. 

Table 3: The iFAST Xtrackers Nikkei 225 UCITS Index ETF offers lower management fees

ETF Name	iFAST Xtrackers Nikkei 225 UCITS Index ETF	Lion-Nomura Japan Active ETF (Powered by AI)
SGD Counter Ticker	SGX: JPY	SGX: JJJ
Fund Manager	iFAST (in advisory with DWS Asset Management)	Lion Global Investors (in advisory with Nomura Asset Management)
Benchmark	Nikkei 225	TOPIX
Strategy Type	Passive Management	Active Management (utilises proprietary quantitative models and AI/machine learning to select Japanese equities across sectors and market caps)
Management Fee	0.25% p.a.	Currently 0.7% p.a., max 0.99% p.a.
Total Expense Ratio	0.43% p.a.	0.98% p.a. for the financial year ended 31 December 2025
Subscription Mode	Cash, SRS	Cash, SRS
Source: iFAST Compilations. Data as of 28 Sept 2026.

Is the SGX-listed Nikkei 225 ETF right for you?

Our preferred ETF for Japan remains the Xtrackers Nikkei 225 UCITS ETF (DR) 1D (LSE: XDJP), given its low expense ratio of just 0.09% per annum, which can translate into meaningful cost savings for long-term investors.

However, the iFAST Xtrackers Nikkei 225 UCITS Index ETF (SGX: JPY) offers a distinct advantage in accessibility. By bringing direct Nikkei 225 exposure to SGX, the ETF allows:

• Trade conveniently in SGD without having to manually convert currencies when entering or exiting positions
• Its one-unit board lot and SGD1 initial issue price also make it easier to start small or invest regularly
• Singapore trading hours mean investors can manage their positions during the local trading day rather than waiting for European markets to open
• The ETF will also be SRS-eligible after listing. With idle SRS balances earning just 0.05% p.a. in interest, investors can put their SRS funds to work for potential long-term capital growth and build their retirement savings.

For investors who have been watching Japan from the sidelines, the new SGX listing brings the Nikkei 225 closer than ever — making Japan’s growth story easier to access and invest in, right from Singapore.

Declaration:

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.