Japanese equities rallied in September, supported by domestic political developments, growing demand for generative AI, and improved sentiment following reductions in US automobile tariffs. Semiconductor stocks rebounded, supported by strong US tech performance and easing trade tensions.
Despite subdued economic growth, domestic demand remained resilient, underpinned by wage increases and capital investment. The Bank of Japan (BoJ)’s Tankan survey indicated stable corporate sentiment. While US tariffs pose risks, their impact has been largely confined to specific sectors.
The election of Sanae Takaichi as LDP President triggered the “Takaichi Trade”, characterised by rising equities, yen depreciation, and a steeper yield curve. Her pro-growth stance includes fiscal expansion and a cautious approach to monetary tightening.
While comparisons with Abenomics should be cautiously made, FY2026 earnings forecasts suggest a recovery. Based on consensus estimates and valuation assumptions, TOPIX could reach higher levels over the medium term.
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Written by Kazuhiko Hosaka, Senior Product Specialist, Asset Management One Co., Ltd