UBS raises the target for the Japan TOPIX index and the Nikkei index due to optimism about tariffs and expectations of a rate cut by the Federal Reserve.

UBS analysts have raised their year-end targets for Japan's TOPIX and Nikkei indices, as President Trump's tariff policies become clearer and expectations for loose monetary policy in the US increase. UBS has raised its year-end target for the TOPIX index from 2750 points to 2900 points, and its target for the Nikkei 225 index from 38000 points to 41000 points. They have also raised their year-end target for the TOPIX index in 2026 from 2900 points to 3100 points, and their target for the Nikkei 225 index from 40000 points to 44000 points. UBS strategist Nozomi Moriya and analyst Miranda Zhang wrote in a report that with reduced uncertainty regarding US tariffs, market expectations of a rate cut by the Fed, and expectations of improved productivity driven by artificial intelligence, stock market performance is stronger than expected. The normalization of the Japanese economy, driven by labor shortages and wage increases, should provide favorable long-term factors for the stock market. Improved corporate governance is another positive factor. However, there is short-term downside risk due to the potential worsening of the US economic growth/inflation combination and potential market turmoil from domestic political uncertainties in Japan.