Interest in factor investing in Japan surged in the first half of 2025. This can be attributed to structural and macroeconomic shifts – particularly the government's policy to end negative interest rates and improve capital efficiency. AI stock rallies and Warren Buffett's stakes in five Japanese trading companies further increase momentum. In this Intelligence report, we highlight Japanese fundamental, firmographic and governance data that could help readers identify factors.

After decades of deflation, Japan is experiencing a notable shift towards inflation and higher interest rates. The Bank of Japan officially ended its negative interest rate policy in early 2024, and inflation has also risen to multi-decade highs (around 3-4%), greatly exceeding the bank’s 2% target. This shift benefits value and quality equity factors. ‘Cash-rich’ companies with strong balance sheets are gaining favour for their ability to weather inflation and deploy cash.

The Tokyo Stock Exchange (TSE)'s new guidelines encouraging companies to improve capital efficiency and shareholder returns have supported the shift. In the past, nearly half of Japan's top-tier listed companies traded below book value.