International equity investors are giving up on Japan.

After dumping their Tokyo stock holdings for four of the past five months, foreigners are on track for their biggest annual exodus since 1987. Back then, they were fleeing bubbly valuations and the Black Monday crash. This time, they're fed up with Prime Minister Shinzo Abe's ineffectual economic policies and the surging yen.

"In the late 1980s, international investors were disappointed and realized it wasn't sustainable," said Toru Ibaya-shi, the Tokyo-based head of Japanese equity investments at UBS Group AG's wealth management unit, which oversees $2 trillion worldwide. "The latest selling tells us how seriously and deeply disappointed they are in Abenomics."