The Japanese Nikkei 225 Stock Average risks a precipitous drop of about 20 percent to 12,000 unless the government can convince investors of the success of its economic stimulus plans, according to the leader of Japan equities, Nomura Holdings Inc. (8604).

The Nikkei index increased 2.1 percent to 14,876.41 as the trading day closed in Tokyo today, having fallen 4.8 percent from the 5 1/2-year high it reached on 22nd May. Investors worry that the government’s plan to increase sales tax will cripple momentum as the economy is already kept afloat by an unprecedented stimulus.

Japan’s equities, however, still outperform other developed markets for the year, as the Nikkei 225 and the broader Topix indices rose 40 percent through yesterday. Japanese stocks have attracted $108.5 billion this year from overseas institutional investors.