TSX lower after index logs fresh record closing high
Investing.com -- Bank of America analysts said Friday that Japan’s stock rally still has further upside, with earnings momentum and supportive revisions expected to drive both TOPIX and the Nikkei higher into 2025.
“Japanese stocks are hitting record highs,” BofA wrote in its latest Japan Equity Strategy note.
The bank said the “sharp rise in Japanese stocks [is] explainable by improved earnings forecasts,” supported by strong revisions to guidance after first-quarter results.
Although “P/E multiples on Japanese stocks have risen significantly,” BofA argued they are “supported by the strong upward revisions to earnings guidance following 1Q results.”
While the bank acknowledged it “would not be surprising if the market were to start losing upward momentum,” it expects “revision volatility to stabilize from late September.”
Looking further ahead, BofA sees continued strength. “Looking toward end-2025, however, we see room for more upside. It is likely that, as we had expected, TOPIX EPS bottomed for both current and next fiscal year forecasts following 1Q results, and expectations for next fiscal year’s earnings recovery are significantly higher than for the current year,” the analysts said.
BofA added that “from October, which begins 2H of Japan’s fiscal year, the next fiscal year’s forecast will exceed half of the blend, strengthening the recovery bias in the 12m forward outlook.”
The bank also expects “more upward revisions to guidance when interim results are announced, which would further improve current fiscal year EPS forecasts.”
Summing up, BofA analysts said: “We remain bullish on Japanese stocks,” pointing to improved visibility on earnings and potential gains in AI and inflation-related sectors.