Japan Retail Traders Pile Bearish Nikkei Bets, Raising Doubts

As Japanese stocks soar to record highs, retail investors are ramping up bearish bets, highlighting lingering doubts about the rally’s staying power.

The contrarian tilt, long embedded in the behavior of Japanese individual investors, is surfacing yet again. Some analysts trace the mindset back to decades of equity market underperformance driven by yen strength and deflation.

The Topix index hit a record high last week after Japan clinched a tariff deal with the US, logging its biggest weekly gains in almost a year. The gains, however, have prompted retail traders to position for a pullback.

Holdings of the Nikkei 225 ...