The issuance and sales volumes of structured products in Japan in July showed an increase, with 97 more products issued this year with volumes up by $803m, or 4.5%, between January and July 2015, according to SRP data. SMBC Nikko Securities was the only one of the leading providers to experience a fall in sales volumes, issuing mainly foreign-exchange- and single index-linked products in 2014 while the market this year has shifted to FX- and index basket-linked products.

The volume increase was seen in all payoffs, with the trend continuing for embedded with knockout and reverse convertible payoffs, given that equity-linked products are the main driver of the market. Digital, knockout, protected tracker and reverse convertible payoffs continued to be favoured. The average term of tranche products issued in July was 2.9 years, compared with 3.35 years in the previous month.

Mitsubishi UFJ Morgan Stanley Securities holds around 19% of the market, doubling its sales volumes over the year although issuing less products. Its success is based in part on its production of Nikkei 225 and Eurostoxx 50-linked products, which have generated most of its volume.

Single index-linked products accounted for one third of total issuance and continued to be the main driver, notably the Nikkei 225. Diversification remains a major concern for local investors, who are looking for more exposure to global markets, according to Kenichi Hasegawa, executive director and chief operating officer at Nippon Wealth (NWB). As a result, there have been more new underlyings this year, including the JPX Nikkei 400 and Russell 2000 with the addition of Nikkei 225, Topix, and Eurostoxx 50.

The Eurostoxx 50 has lost traction compared with previous month, nevertheless its volume has increased by the factor of three compared with same period last year.

S&P Dow Jones Indices, the Japan Exchange Group and its group company Osaka Exchange (OSE) have reached a strategic agreement to jointly introduce the S&P/JPX JGB Vix Index, which measures the implied volatility of Japanese government bonds using options on JGB futures listed on OSE. In asset management, smart beta indices can replace selected active strategies at much lower cost and avoid style drift, which is a problem a lot of active funds are facing, said Shirley Low, head of Asia Pacific at Stoxx.

The full market review for Japan will be available shortly.

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