Long-term foreign investors are jumping on a seemingly unstoppable Nikkei rally amid expectations that Japan's famously frugal companies will start coughing up more cash to shareholders, analysts say.
"Many long-term global investors have been neutral or underweight on Japan equities but are now catching up to lock in the relatively higher earnings growth visibility," BNP Paribas chief Japan equity strategist Shun Maruyama told CNBC. "With dividends and share buybacks also expected to rise, cash equities buying by foreign investors is expected to continue in a sustained way."
The Nikkei has been on a roll of late, up 19 percent year-to-date after surging 65.9 percent across 2013-2014.
Foreign investors are behind the index's 7.4 percent rally since the beginning of March. They poured 822 billion yen ($6.83 billion) into Japanese stocks, the biggest jump in four months, according to an April 8 Nomura research note.
"Foreign investors are just playing catch up because they don't want to miss the bus," said Sunrise Brokers' head of Japan and Asian equities Ben Collett.
Not just about QE
Unlike previous rallies that were triggered by the Bank of Japan's monetary easing, investors are focused on another Abenomics policy this time: corporate governance reform.
"Overseas investors had [far fewer] questions about Bank of Japan policy, but there was keen interest in deregulation and the next steps in beefing up corporate governance," UBS economist Daiju Aoki said in a note on April 8.