Goldman upgrades Japan to overweight and lifts its TOPIX target to 4,300, arguing political stability under Takaichi and structural governance reforms can drive further foreign inflows and valuation expansion.
Summary:
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Goldman Sachs upgrades Japanese equities to overweight from neutral.
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12-month TOPIX target raised to 4,300 (from 3,900).
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Call anchored in stronger mandate for PM Sanae Takaichi and expected foreign inflows.
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Structural drivers: governance reform, buybacks, valuation expansion.
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Favoured themes: defence, critical resources, shipbuilding, power/energy, US re-industrialisation plays.
Goldman Sachs has doubled down on its bullish Japan stance, upgrading the market to overweight and lifting its 12-month target for the TOPIX to 4,300 from 3,900. The shift reflects growing conviction that Japan’s post-election momentum can extend beyond a short-term political bounce and translate into sustained foreign capital inflows and broader valuation expansion.
The upgrade follows a powerful rally in Japanese equities after Prime Minister Sanae Takaichi secured a decisive election victory, reinforcing expectations of fiscal expansion and policy continuity. Goldman argues that a clearer political mandate reduces uncertainty, strengthens reform momentum and supports renewed overseas investor engagement with Japan’s equity market.
Importantly, the bank frames its bullishness as structural rather than tactical. Ongoing improvements in corporate governance, capital efficiency and shareholder returns remain central to the thesis. Japanese companies have continued to lift buybacks and focus on return on equity, helping narrow the long-standing valuation discount versus global peers. Goldman sees further scope for index-level multiple expansion if foreign participation deepens under a more stable policy backdrop.
Sector positioning reflects both domestic and global policy currents. The firm highlights defence, critical resources, shipbuilding and power infrastructure as potential beneficiaries of strategic spending priorities. It also points to US re-industrialisation plays and semiconductor-linked names as earnings tailwinds, given Japan’s role in global supply chains.
While Japanese equities have already delivered one of their strongest two-week relative outperformance bursts in years, Goldman contends the rally is not exhausted. The key debate now centres on sustainability: whether inflows, earnings resilience and reform momentum can offset crowding risk and any volatility stemming from yen moves or shifts in Bank of Japan expectations.
For now, Goldman keeps Japan at the top of its global conviction list, signalling confidence that the combination of political stability and structural corporate change can continue to underpin gains into 2026.
This article was written by Eamonn Sheridan at investinglive.com.