"Mrs. Watanabe" returns to the battlefield! AI bull market sparks frenzy among Japanese retail investors, with Japan's daily stock trading volume soaring past 10 trillion yen.

The Japanese retail investors, once famous worldwide for their enthusiasm for forex arbitrage trading—the so-called "Mrs. Watanabe"—are now turning their attention from exchange rate differences to the capital markets of the AI era. Their participation has climbed to the highest level in decades, with significantly increased market volatility as a result.

According to data from JPX, the parent company of the Tokyo Stock Exchange, in the first three weeks of May, the daily trading value of stocks on the TSE’s main board surpassed ¥10 trillion (about $63 billion) for the first time. Overseas funds and domestic investors are racing to bet on Japanese tech companies, seeing them as the “pick and shovel” beneficiaries of the AI boom and chip battles, together pushing stock prices to historical highs.

This surge in trading volume has been accompanied by a rapid expansion of off-exchange trading. Securities firms say retail investors’ influence on market movements has reached unprecedented heights. Oki Matsumoto, founder of Monex—one of Japan’s largest online brokerages—commented that the “AI craze” has swept through Japanese retail investors, bringing a large number of investors into the market, with retail investors’ activity in the Japanese market now at its highest level ever.

Analysts warn that Japan’s stock market is already one of the world’s most momentum-driven, and the continued growth of retail investors is adding further volatility. Especially during the just-ended earnings season, even a slight miss in expectations can subject individual stocks to harsh punishment by the market.

Retail Investor Share Hits Highest Level Since Abenomics

According to TSE data, the share of retail investors in trading on the Tokyo Stock Exchange has steadily climbed for more than a quarter-century, reaching 25% in 2025, the peak since the bull market triggered by Abenomics.

However, analysis by Jefferies suggests the actual increase in retail investment may still be underestimated. TSE data does not include the booming proprietary trading systems—off-exchange platforms—which are attracting more and more investor funds. After factoring in alternative exchange data, Jefferies analysts estimate that in April this year, trading by retail investors and alternative exchanges combined accounted for 39% of the entire market.

Japan’s off-exchange proprietary trading platforms are mainly led by Japannext and Japan Alternative Market (JAX), both of which have partnerships with online brokers like Rakuten Securities, SBI Securities, and Monex. According to Takeya Kamei, CEO of JAX, about half of its trading volume comes from retail investors, with the rest mostly from high-frequency market makers providing liquidity. Notably, TSE's statistics also don’t fully capture some margin trades by retail investors, with such data grouped under "brokers."

Analysts point out that there is a risk of double-counting in the above data, but the overall trend shows that Japanese retail activity has returned to a level last seen during the asset bubble of the 1980s.

Retail Investors Create Intraday Volatility, Individual Stock Swings More Extreme

Oki Matsumoto describes the market structure as "Institutions set the overall direction, volatility is created by retail"—large institutional investors still dominate the market’s direction, but intraday volatility and price elasticity now increasingly stem from the inflow and outflow of retail funds.

Jeff Hutchins, Head of Japan Equities Trading at Jefferies, stated, "The rise in Japanese retail trading is a major shift. This market was previously dominated by international institutions, and now new players have joined the party. We've already seen the impact this earnings season." He added:

"Any Japanese company with positive momentum, especially in technology and AI, if they even slightly lower expectations, their stock price will get hammered."

Against this backdrop, stocks such as Nitto Boseki, Mitsui E&S, Seikoh Giken, Ajinomoto, Furukawa Electric, and Fujikura are all considered to have been notably affected by retail investor behavior.

Oki Matsumoto notes that in the past, ETFs tracking the broad market attracted the most retail trading volume, but now individual AI-related stocks like Furukawa Electric and Fujikura have exceeded that. "Retail investors are no longer just buying the index—they’re buying specific stocks, and that's quite unusual," he says.

Policy Tailwinds But Retail Investors Are Still Net Sellers Overall

The expansion in retail trading aligns with Japanese government policy. Authorities are actively encouraging residents to shift savings parked in bank accounts into higher-yielding investments to address pension pressures from an aging population and in line with the trending rise of domestic interest rates.

At the market infrastructure level, off-exchange proprietary trading platforms have developed rapidly in Japan. Ten years ago, alternative exchange volume accounted for only single-digit percentages of the market, but regulators have since clearly supported these platforms to encourage competition. Industry insiders say this has positively affected retail investors’ trading costs.

However, a structural phenomenon worth noting is: despite the rising participation of retail investors, at the Tokyo Stock Exchange level, retail fund flows are still dominated by net selling—indicating some households are taking advantage of rising prices to gradually reduce long-term positions. Traditionally, net buying force in the Japanese market largely comes from foreign institutional investors and domestic corporations.

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