Merrill Lynch’s Global Fund Manager Survey for September unequivocally depicts further deterioration in sentiment towards fund allocation for Japanese stocks. The effects of a pullback in overseas capital — not to mention the control overseas investors wield in Tokyo trading — are already evident as the Nikkei fell to a new multi-year low Thursday.

By way of Kabushiki Shimbun, the Merrill survey results show that managers ‘over-weighting’ Japan fell to 16% from 22% in August, while those ‘under-weighting’ Japan increased to 39% from 34%. Furthermore, those expecting to ‘over-weight’ Japan in the next year dropped to 2% from 9% previously. No surprise that defensive stocks are favored.

Meanwhile, the ultimate, elusive value trap remains. The Japanese could do much to help themselves, but there’s still no real indication of forthcoming action.

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