Global Funds That Drove Topix Rally Are Now Risk to More Gains

Traders trying to push Japanese shares back up to three-decade highs face increasing obstacles — including selling by global funds that helped fuel this year’s gains.

That’s the view of strategists who also see an increasingly unpopular prime minister unable to push through bold measures, and risks of fallout from China’s economic slowdown as factors likely to get in the way of Japanese stocks heading even higher.

The Topix index has retreated about 2% after hitting the highest since 1990 on Aug. 1. The question is whether the market will regain the bullishness that saw the benchmark rise for the ...