Japan Equity Strategy: Ongoing stock rally driven by earnings: Raising price targets to 75,000 for Nikkei 225 and 4,400 for TOPIX

Research evidence excerpt

Japan Equity Strategy: Ongoing stock rally driven by earnings: Raising price targets to 75,000 for Nikkei 225 and 4,400 for TOPIX

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upside for TOPIX is just 7-8%. Although the pace of share price gains was rapid in Rajiv Batra

1H, semiconductor and semiconductor production equipment (SPE) companies, such (65) 6882-8151

rajiv.j.batra@jpmorgan.com

as Kioxia and electric wire & cable manufacturers, reported strong growth in earnings J.P. Morgan Securities Singapore Private Limited

(we raise our FY2026 EPS estimate from ¥198 as of end-2025 to the current ¥234: Dubravko Lakos-Bujas

Figure 3TOPIXEPSForecast). Valuations (P/E, Figure 4TOPIXP/EForecast) have cooled to the 16x level, alleviating concerns (1-212) 622-3601

about overheating. We see upside risk to profit growth. dubravko.lakos-bujas@jpmorgan.com

J.P. Morgan Securities LLC

In 2H, inflation, the start of interest rate hikes by central banks (the US Fed’s reaction

function is still unclear) and geopolitical risks are the main concerns in global markets.

However, AI appears to be in a supercycle, with AI inference as the main growth area

and US hyperscalers’ investments in data centers driving up demand for

semiconductor chips, memory, and electronic components beyond market

expectations. Large IPOs by SpaceX, Anthropic (planned), and OpenAI (planned)

with initial public offerings on the scale of a trillion dollars this year are also likely to

support risk-taking sentiment in the market. In the Japanese market, investors are

concerned about fiscal policy, rising long-term interest rates, and depreciation

pressure on the yen. We believe such negative factors are outweighed by positive

factors, such as structural changes (corporate reforms improving balance sheets and