Goldman Sachs: After against the trend bottomed out in March, American bulls are accelerating to return to Japanese stocks.

According to the Chief Japanese Equity Strategist at Goldman Sachs Japan, as US investor confidence recovers from the initial impact of the Middle East crisis, they are returning to the Japanese stock market. Bruce Kirk stated that the stabilization of the yen is part of the reason driving this shift, which has also stimulated US capital inflows into the technology-heavy Nikkei 225 index, as seen in its divergence from the TOPIX index. He also added that given Japanese policymakers are unlikely to tolerate a significant depreciation of the yen to below the current level of nearly 160 yen to 1 US dollar, unhedged US investors may be more willing to buy Japanese stocks. Kirk said in an interview on April 20th, "The situation in Japan currently looks quite robust." He mentioned that once the market shifts its focus from the short term to the mid-term, buying pressure will quickly increase. Despite uncertainties in geopolitics and the energy market, Kirk noted that the rebound in the Japanese stock market has been faster than expected, supported by structural advantages such as strategic oil reserves and diversified liquefied natural gas supplies. The Nikkei 225 index has already risen by about 16% this month, erasing previous losses, surpassing both the TOPIX index and the S&P 500 index with a gain of around 8%. In early trading on Wednesday, US stock futures rose after President Trump announced he would extend the ceasefire agreement with Iran until negotiations end. As of deadline, the Nikkei 225 index rose by 0.22%, while the TOPIX index fell by 0.75%. Kirk mentioned that investors are increasingly viewing the recent selloff in the Japanese stock market (a 13% decline in the Nikkei 225 index in March) as being driven by global factors rather than Japan-specific reasons, giving them more confidence to re-enter the market. He added that positive domestic factors also reinforced this view, with expectations that earnings reports, mid-term plan revisions, and annual shareholder meetings will strengthen scrutiny on capital efficiency and balance sheet allocation. According to data from the Japan Exchange Group, North American investors were the only overseas group to be net buyers of Japanese stocks in March. Kirk added that policy changes could provide further support, with the Japanese Financial Services Agency expected to finalize new corporate governance guidelines before summer, increasing pressure on companies to divest cross-shareholdings, deploy excess cash, and enhance returns. Kirk stated that the sustainability of the revaluation of the Japanese stock market will depend on higher returns on equity. While the targets for some large banks are around 15% ROE, approximately 44% of companies listed on the TOPIX index still have an ROE below 8%. The risk of further selloffs still exists, especially if tensions in the Middle East escalate and harm global economic growth. Kirk mentioned that Japan, highly sensitive to global economic growth, could face risks in such a scenario. Since the Iran war, his team has lowered the 12-month target for the TOPIX index from 4300 points to 4200 points. However, he stated, "This is not what people are currently expecting. In this situation, foreign investors comparing Japan to other developed markets will find that Japan actually has many advantages."