In Shinzo Abe’s Japan, corporate profits and the stock market are surging while household income shrinks with the economy. Investors are acting like they expect the divergence to grow.

They plowed $776 million into securities tracking the Nikkei 225 Stock Average and JPX-Nikkei Index 400 last week, while pulling $417 million from exchange-traded funds following the broader Topix index, data compiled by Bloomberg show. The Nikkei 225, dominated by exporters with an average market value five times larger than Topix constituents that include small retailers, is the world’s second best-performing equity gauge since the central bank’s stimulus boost on Oct. 31 dragged the yen to a seven-year low.

Amundi Japan Ltd. and Mizuho Asset Management Co. say favorable prospects for Japan’s manufacturers amid unprecedented monetary easing contrast with a gloomy outlook for businesses reliant on domestic demand. Prime Minister Abe’s policies are doing less for a populace mostly employed at smaller companies as pay increases fail to keep pace with inflation, concerns that may be holding back the Topix.

“Large-cap companies with offshore business benefit from a weaker yen, and that makes the Nikkei 225 more attractive,” said Masanaga Kono, a senior strategist at Amundi. “Compared with that, we can’t expect much from the Japanese domestic companies, which carry a bigger weight in the economy.”

Outflows from Topix funds last week were the biggest among 96 indexes on which Japanese ETFs have been built, followed by funds following the MSCI Japan Index hedged into euros and ones tracking the Topix Total Return Index, data compiled by Bloomberg show.

The Topix rose 0.6 percent to 1,409.15 today, its highest close since June 2008, while the Nikkei 225 advanced 0.3 percent to 17,407.62. The yen traded at 117.91 per dollar after touching a seven-year low of 118.98 on Nov. 20. Stock markets were closed yesterday for a holiday.

Since November 2012, when elections were called that brought Abe to power, investors put 378 billion yen ($3.2 billion) into Nomura Holdings Inc.’s Nikkei 225 ETF. the largest tracking the gauge, according to data compiled by Bloomberg. They invested 299 billion yen in Nomura’s Topix fund, the data show. Both underlying stock gauges have roughly doubled, making investors $1 trillion richer.

Japan unexpectedly slipped into recession last quarter, preliminary data showed last week, as consumers struggled following an April sales-tax increase. Gross domestic product shrank an annualized 1.6 percent in the three months through September, after a 7.3 percent slump the quarter before, the Cabinet Office said Nov. 17.

“It’s a bifurcation the economic outlook doesn’t look good, but stocks are going to go significantly higher,” Arne Espe, the San Antonio-based fund manager at USAA Investments, said by phone. The firm oversees about $66 billion. “It’s a confidence game that they’re trying to play and we think ultimately will end badly. It means the yen is going a heck of a lot lower, which is not good for the average citizen.”

Abe, 60, delayed a second planned increase in the sales tax on Nov. 18 and called an early election, seeking to win public endorsement for the decision and his plans to revive the Japanese economy. The support rating for his Cabinet dropped to 44 percent, the lowest since the premier took office, the Nikkei newspaper reported yesterday, citing a poll conducted Nov. 21-23. Just 33 percent of respondents said they supported Abe’s economic policies, while 51 percent said they opposed them, according to the Nikkei.

The GDP data don’t mean his Abenomics program the three arrows of monetary easing, spending and structural reform is a failure, Abe said last week. The BOJ is doing its best to help, unexpectedly expanding its bond-buying program on Oct. 31 and tripling ETF purchases to 3 trillion yen a year.

“The companies that benefit are being bought, and those that don’t are being ignored,” Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd. which has 39 trillion yen in assets, said by phone Nov. 20. Abe’s stimulus measures “don’t reach the whole economy. We had the first and second arrows. The third one hasn’t been fired and may never be.”

While wages in Japan rose by the most in more than six years in September, climbing 0.5 percent from a year earlier, earnings adjusted for inflation still fell 2.9 percent, a 15th straight monthly drop.

Brokerages, appliance makers and tire manufacturers led Topix gains under Abe through last week. The index has 1,825 constituents with an average value of $2.3 billion. In the Nikkei 225, the average company is worth $12.2 billion. Fuji Heavy Industries Ltd. the maker of Subaru cars, and Mazda Motor Corp. which gets 76 percent of sales outside Japan, climbed the most.

The Nikkei 225’s closing price was 12.5 times that of the Topix on Nov. 13, the highest level for the measure known as the NT Ratio this year, amid foreign buying of Japanese stocks. Investors outside Japan poured 3 trillion yen into the nation’s equities in the four weeks through Nov. 14, finance ministry data show.

For many overseas investors, the Nikkei 225 is the primary benchmark for Japanese equities. Central-bank buying also favors the Nikkei 225: more than half the BOJ’s ETF purchases will go into funds tracking the gauge, according to Tokai Tokyo Securities Co.

Another equity gauge, the JPX-Nikkei 400, is luring flows away from Topix ETFs as it outpaces the other two benchmark measures this year with a 8.6 percent rally through last week. The BOJ last month made funds tracking the newer measure eligible for its ETF buying. Mizuho Securities Co. says as much as 900 billion yen of this may go to the JPX-Nikkei 400 every year.

The JPX-Nikkei 400 is an experiment backed by Abe’s Liberal Democratic Party in using a stock index to promote company strategies that boost return on equity. The measure had attracted about 230.3 billion yen in four ETFs as of Nov. 19.

“In this second round of Abenomics, there’s unlikely to be an influx of funds because of economic-growth policies, so the focus will be on improved governance at companies,” said Seiichiro Iwamoto, who helps oversee the equivalent of $37 billion at Mizuho Asset in Tokyo. “Instead of money going into the broader Topix, there’ll be a flight to quality. I think that is being seen in ETF flows, with the JPX-Nikkei 400 being a prime beneficiary.”

Naoki Fujiwara, Tokyo-based chief fund manager at Shinkin Asset Management Co. which has about $6 billion, says the premier’s policies boost the whole equity market.

Under Abe, the Nikkei 225’s 100 percent rally through Nov. 21 compares with 94 percent for the Topix.

A split is more evident in companies’ profit outlooks, according to Daiwa Securities Group Inc. Nikkei 225 companies have an average estimated three-year earnings growth rate of 11 percent compared with 8 percent for those in the Topix, according to analyst forecasts compiled by Bloomberg.

Iida Group Holdings Co. a Tokyo-based homebuilder that’s in the Topix and not the Nikkei 225, cut its full-year net income target by 47 percent on Nov. 11, citing a lack of improvement in the disposable incomes of its main customers.

In contrast, Toyota Motor Corp. which makes 75 percent of revenue outside Japan, is predicting record profit as a weaker yen boosts the value of high-margin Lexus luxury models and SUVs sold abroad.

“Corporate earnings are being pushed up by the large exporters, whereas domestic-reliant companies are struggling,” said Makoto Morita, a strategist at Daiwa Securities.

The disparity can also be seen in valuations. The Nikkei 225 traded at 19.1 times estimated earnings last week, compared with 15.6 times for the Topix. On Nov. 14, 2012, the day before elections were called that ushered in Abe’s government, the figures were 14.5 and 13.6, respectively. The Topix Small Index, which excludes the large stocks on the Topix 500 Index, traded below the value of its companies’ net assets.

“The large caps are seeing the benefits of Abenomics, but the smaller caps are far behind,” said Mizuho Asset’s Iwamoto. “That should be the focus for Abe’s regime after the election. If the benefits don’t spread from manufacturers into the domestic sector, the show will be over.”