Foreign investors have had just about enough of “Abenomics.”

After pumping record amounts of cash into Japanese shares last year, they’ve hardly added to holdings in 2014.

Inflows are down 94 percent this year to ¥898 billion, on pace for the smallest annual amount since the 2008 global financial crisis. The month of April 2013 alone registered almost three times as much foreign investment in the stock market as all of 2014.

These figures provide the clearest look at how global investors have become disillusioned with Prime Minister Shinzo Abe after he pushed through the consumption tax increase in April that sent Japan into recession.

Fund managers from Sumitomo Mitsui Trust Bank Ltd. to MV Financial say that to lure investors back, Abe needs to move beyond short-term stimulus and start enacting the structural changes he laid out in the “third arrow” of his initial plan to end Japan’s two-decade economic malaise.

“We need to see a framework where growth isn’t dependent on monetary easing,” Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd. “If not growth, then at least a way to increase productivity. For now there’s nothing like that, so I imagine it’ll be hard for stocks to keep going higher and for foreigners to take an interest in them.”

Purchases of the nation’s shares through Dec. 19 by investors outside Japan were less than a tenth of the ¥15.1 trillion they bought last year, according to data from the Tokyo Stock Exchange. Trust banks, which typically trade on behalf of pension funds, added ¥2.7 trillion, after offloading about ¥4 trillion of equities in 2013. Individuals were net sellers for a fourth straight year.

“Where is the Japanese Facebook? Where is the Japanese Google?” Katrina Lamb, head of investment strategy and research at MV Financial in Bethesda, Maryland, said in a phone interview. The firm oversees $500 million and has been avoiding Japanese stocks in its international portfolios. “They have lost their place as global leaders. The potential exists in Japan for recapturing some of that, but it requires profound changes and changes are just not something that Japanese are good at.”

Foreigners were more optimistic in 2013, making record purchases of Japanese equities as Abe embarked on his economic growth policies of unorthodox monetary easing, fiscal stimulus and structural overhaul, known as the three arrows of Abenomics.

The Topix index soared 51 percent to crown Japan as the best-performing developed market.

The prime minister has courted international investors, exhorting Wall Street in a September 2013 speech to “buy my Abenomics.” A year later, the higher consumption tax had pushed the nation back into recession. Non-domestic investors were net sellers of equities this year until the Bank of Japan’s surprise easing on Oct. 31. While the Topix has climbed 9.6 percent in 2014, the weakening yen means that in dollar terms, the share gauge is poised for a 4.3 percent loss.

“The sales tax hike hit Japan before Abe’s third arrow could emerge, and the economy completely stalled,” said Tetsuo Seshimo, a portfolio manager at Saison Asset Management Co. in Tokyo. “It hasn’t been a market where foreigners had reasons to aggressively buy stocks, and it’s difficult to paint a strong growth story from this point onward as well.”

With overseas demand for shares drying up, domestic policy changes are filling the gap with state and pension-fund cash. The Government Pension Investment Fund, the world’s largest manager of retirement savings with ¥131 trillion in assets, pledged Oct. 31 to more than double its target allocation for domestic shares. At the time, that implied buying another ¥9.8 trillion of Japanese stocks, according to calculations by Bloomberg.

The same day, the BOJ unveiled an expansion of its unorthodox asset-purchasing program, including tripling investments in exchange-traded funds to about ¥3 trillion a year.

While the Topix soared 4.3 percent on Oct. 31, the rally was short-lived compared with gains spurred by the round of BOJ easing in April 2013.

The gauge climbed 13 percent from the last day of October through a December peak, adding ¥62 trillion in value. Last year, it surged 26 percent from the announcement on April 4 through a May high, which made investors ¥92 trillion richer. Average daily trading volume on the Topix was 40 percent lower this time.

“It’s the foreigners who pull Japanese stocks up,” said Tatsushi Maeno, head of Japanese equities at Pinebridge Investments Japan. “If we start off next year with modest gains, foreign investors might come back. But it won’t be as extreme as when Abenomics first began.”

Trust banks bought ¥972 billion in shares from Oct. 27 through the most recent data on Dec. 19, while foreign investors added ¥2 trillion. Individuals sold ¥2.7 trillion during that period, as the Topix gained 12 percent.

Foreigners are “momentum jockeys” who tend to follow the trend, while individuals usually do the opposite, buying when the market is weak, said Jonathan Allum, a London-based strategist at SMBC Nikko Capital Markets Ltd. “The interesting group are the trust banks, who seem to be on something of a buying spree, which I expect to continue into the new year.”

Fund flows from the central bank and GPIF underpin Morgan Stanley MUFG Securities Co.’s forecast for the Topix to climb to 1,680 by the end of 2015, an 18 percent jump from the last close.

A lower currency will buoy earnings and return on equity is improving, according to the brokerage. The median projection of 10 analysts and investors surveyed by Bloomberg is for the Topix to gain 16 percent to 1,650.

Companies have been slow to adjust earnings forecasts to the weakening yen, which has declined 12 percent this year and touched a seven-year low Dec. 8.

Japanese businesses expect the currency at 103.88 per dollar in the fiscal year ending March, the BOJ’s quarterly “tankan” survey showed this month, despite the yen trading at an average level of 118.24 during the period the survey was conducted.

“Companies that haven’t already revised their earnings forecasts will probably do so by the end of this fiscal year,” said Kenji Shiomura, a senior strategist at Daiwa Securities Group Inc. “With yen weakness expected to continue next year, businesses with overseas demand will provide a tailwind for the market.”

Aggregate net income will rise 16 percent to a record ¥21.4 trillion this fiscal year at 219 of the country’s largest firms, based on analyst estimates compiled by Bloomberg.

After winning a second term from voters earlier this month, the Abe administration’s initial focus in 2015 will be a fiscal stimulus package and lower corporate taxes.

The administration approved ¥3.5 trillion in extra spending to aid the economy over the weekend, including shopping vouchers, subsidized heating fuel for the poor and low interest loans for small businesses hurt by rising input costs. A panel will submit a draft plan for a corporate tax cut of “slightly more than” 2.5 percentage points for the next fiscal year, NHK reported Friday.

Investors are also waiting for a loosening of labor rules, agreement on the Trans-Pacific Partnership trade pact and for companies to buy into Abenomics by raising wages and spending their record cash hoards on business investment.

“If an eye-opening growth strategy was proposed, foreigners might come back and start buying again,” Sumitomo Mitsui Trust’s Sera said. “But if we haven’t seen one by now, there’s almost no chance we ever will.”

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