A recent report from Goldman Sachs indicates that despite a stronger yen, the profit momentum of Japanese companies remains robust, providing a positive signal for the ongoing rise in the Japanese stock market. The earnings revision index compiled by Goldman Sachs shows that the proportion of analysts raising their earnings forecasts exceeds those lowering their forecasts, although there are significant differences across industries—optimistic about the banking sector, but relatively pessimistic about exporters such as transportation equipment manufacturers.
Goldman Sachs strategist Kazunori Tatebe stated: "The current profit momentum exceeds expectations, and if this strong profit forecast is confirmed, it will act as a positive catalyst for the Japanese stock market." However, he also warned that if U.S. policymakers fail to achieve a soft landing for the economy, the optimistic outlook may be affected. After the market sell-off in early August, Goldman Sachs lowered its year-end target for the TOPIX from around 2850 points to 2700 points but maintained its 12-month target at 2900 points.
Tatebe expects the Japanese stock market to show range-bound fluctuations before the U.S. election. He pointed out: "In the coming months, the U.S. economy will be a key factor influencing the Japanese stock market, especially as the year-end approaches." Macquarie Group is also optimistic about the Japanese stock market's prospects, predicting that the TOPIX will reach 3200 points by the end of 2025. Macquarie analyst Damian Thong stated that despite potential losses from the yen's appreciation, the Japanese stock market still performs well in dollar terms.
Additionally, Tatebe believes that corporate governance reforms will continue to drive the development of the Japanese stock market, with data showing significant changes in aspects such as increased stock buybacks by Japanese companies. He is also optimistic about domestically oriented stocks driven by improvements in the Japanese economy. He noted that recently, domestically oriented stocks have performed well, partly due to the stronger yen. As wages and prices rise, signs of consumption recovery will further boost the stock market. He added: "If Japan's inflation situation remains stable, multiple sectors related to domestic demand will still have the potential for outstanding performance."
