Japan equity memo: How to read Nikkei 225 EPS and P/E ratio

Research evidence excerpt

Japan equity memo: How to read Nikkei 225 EPS and P/E ratio

Japan equity memo: How to read Nikkei 225 EPS Global Markets Research

and P/E ratio 23 June 2026

EQUITY: JAPAN STRATEGY

Weight-adjusted figures matter more than Research Analysts

unweighted figures Macro strategy Tomochika Kitaoka - NSC

Without weightings, EPS is ¥3,800 and P/E 19x, but when considering tomochika.kitaoka@nomura.com

weightings, EPS is ¥2,600 and P/E is around 28x +81 3 6703 1815

Naoya Fuji - NSC

Figures published in the Nikkei are not weight-adjusted, but weight-adjusted naoya.fuji@nomura.com

figures are closer to economic reality +81 3 6703 1245

With the Nikkei 225 remarkably strong on the back of a rally in AI and semiconductor

stocks, we think the question of the true value of the Nikkei 225 EPS and P/E may come

into sharper focus in discussions about earnings and valuation. The Nikkei 225 forward

P/E published in the Nikkei (at the upper right of page 20 in the 23 June edition) was

18.85x, which is not far from the TSE Prime Market's 18.21x. This seems to suggest that

the Nikkei 225 is not too overvalued. Many market participants apparently note this figure

in their daily records. EPS calculated by dividing the index level by the P/E works out to

¥3,838 using the P/E listed in the Nikkei. This figure is often used to calculate, for

example, that the Nikkei 225 could reach 80,000 if EPS is revised up by another 10% or

P/E rises from 19x to 21x. However, this is an unweighted figure that does not adjust for

the weighting bias within the Nikkei 225, and the gap with the weight-adjusted figure is

becoming more pronounced (Figure1).

Our analysts' 12-month forward Nikkei 225 EPS forecast of ¥3,810 is close to the above figure