Japanese equities outperformed global markets in January, supported by resilient risk appetite and renewed policy momentum following speculation that Prime Minister Takaichi might dissolve the Lower House. This drove broad positioning around the “Takaichi trade,” particularly in defence, advanced materials, and investment‑related sectors. Although China’s tightening of dual‑use export controls, proposals for consumption‑tax cuts, and a brief bout of yen appreciation following reported exchange‑rate checks created temporary volatility through higher long‑term yields and pressure on exporters, overall market conditions remained firm.
Domestic sentiment indicators, including the Economy Watchers Survey and the BOJ Opinion Survey, show improving forward expectations, supported by steady tourism demand despite fewer Chinese visitors, firmer household growth sentiment, rising real incomes supported by solid wage gains, and continued productivity‑oriented investment amid labour shortages.
The decisive 8 February general election, which delivered an LDP single‑party majority and a two‑thirds majority for the ruling coalition, strengthened expectations for policy stability and faster execution of “Sanaenomics,” including investment promotion, defence‑budget expansion, and possible zero‑rating of the consumption tax on food and beverages.
Corporate earnings remain solid, with most TSE Prime Market companies reporting revenue and operating profit growth for the October–December quarter. Based on IBES consensus, FY2027 EPS of 248 implies TOPIX levels of around 4,000 at a 16× multiple and roughly 4,200 at 17×, assuming stable global conditions and no sharp yen appreciation. Investors will now watch the pace of the administration’s policy rollout, the trajectory of real wages, and the durability of corporate actions supporting the market’s re‑rating.
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Written by Kazuhiko Hosaka, Senior Product Specialist, Asset Management One Co., Ltd