Japan Insight: BofA Strategy Monthly: Reassessing Japan equities in the age of AI, hardware and physical assets

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Japan Insight: BofA Strategy Monthly: Reassessing Japan equities in the age of AI, hardware and physical assets

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Japan Insight: BofA Strategy Monthly

Reassessing Japan equities in the age of

AI, hardware and physical assets

Investment Strategy

26 May 2026

Reversal in merits of industrial structure: Hardware and Investment Strategy

physical assets now hold an advantage Japan

Although guidance this results season was conservative, in such years guidance tends to

Tokyo Research

rise in a stepwise fashion as 1Q and 2Q results are released. However, the risk is that BofAS Japan

inflation pushes up interest rates, but in the US, this is in line with stronger-than- Masashi Akutsu >>

expected economic data. Domestic interest rates have risen on concerns about fiscal Strategist BofAS Japan

deterioration, and 10y JGB yields have temporarily risen to 2.8%, but the TOPIX earnings +81 3 6225 7754

yield is c.6%. On the other hand, a positive scenario is that rising US long-term interest masashi.akutsu@bofa.com

rates force President Trump to soften his stance, leading to the reopening of the Strait See Team Page for List of Analysts

of Hormuz.

It is also important to note that the medium-term attractiveness of Japanese equities is

increasing. Japanese companies provide semiconductor manufacturing equipment (SPE), Exhibit 1: 10 highlighted stocks (based

components and materials that are essential to the AI supply chain. In addition, supply on a top-down + bottom-up approach

chains and production facilities are being rebuilt globally to mitigate geopolitical threats, We highlight stocks with favorable catalysts

and wealth is concentrated in these areas. Now is the time to reassess Japan's industrial from both macro and micro perspectives