"The Nikkei Could Reach 75,000 by Year-End"... Outlook for Japanese Stocks Rises as Domestic Demand Shares Gain

[Financial News, Tokyo = Special Correspondent Seo Hye-jin] Expectations are spreading that the Nikkei Stock Average (Nikkei 225) could rise to around 75,000 by the end of the year, supported by improving earnings at Japanese companies. Some analysts even say it could reach 90,000. There is also hope that if the rally led by artificial intelligence and semiconductor stocks broadens to domestic demand shares, the index could surpass the all-time high set in June.
According to a survey released on the 17th by Nikkei, Inc. of 10 financial firms, including brokerages and banks, year-end forecasts for the Nikkei Stock Average (Nikkei 225) were clustered around 75,000. Citigroup Securities was the most bullish at 90,000, followed by Daiwa Securities Group Inc. at 80,000. The most cautious estimate came from Okasan Securities Co., Ltd. at 64,600.
The Nikkei Stock Average (Nikkei 225) closed at 69,220.25 on the day, up 506.45 points, or 0.74%, from the previous session, marking a fifth straight gain. It was the first time in about a month that the index had reclaimed the 69,000 level on a closing basis, since Sept. 6. To reach 75,000 by year-end, it would need to rise 8.3% from that close. An 80,000 level would be 15.6% higher, while 90,000 would be 30.0% above it.
Financial firms have been raising their year-end forecasts one after another, reflecting stronger-than-expected earnings from major companies in the April-June period. Nomura Securities also lifted its outlook in mid-September from 68,000 to 70,000. Tomoya Kitaoka, chief equity strategist at Nomura Securities, said, "The April-June earnings were unexpectedly strong in a positive sense." He added, "If the solid performance continues in the April-September interim results, it would not be surprising to see the index push beyond 70,000 and attempt further gains."
The Nikkei Stock Average (Nikkei 225) hit an all-time high of 72,366 on June 25, driven by gains in AI and semiconductor stocks such as Kioxia Holdings Corporation. It later fell to the low 60,000 range at the end of July on concerns about overheating in AI investment, but has since recovered to above 69,000 on the back of strong corporate results. The index is now about 4.5% away from its record high.
Expectations for further gains are also being supported by forecasts of higher corporate profits. According to QUICK and FactSet, the 12-month forward earnings per share forecast for companies in the TOPIX (Tokyo Stock Price Index) has risen about 9% from the end of March. As earnings expectations improve, analysts say stock valuations have become less stretched.
Concerns about excessive investment in AI have also eased. Ryota Sakagami, a stock strategist at Citigroup Securities who projected the Nikkei at 90,000, pointed to the continued strong investment appetite of hyperscalers, or large cloud providers. Major U.S. tech firms, including Microsoft, also plan to keep investing in data centers.
Key variables include further rate hikes by the Bank of Japan (BOJ), tensions in the Middle East, and the United States midterm elections in November. If the weakness of the Japanese yen eases, retail and food stocks could benefit, but political and economic uncertainty remains. Kohei Onishi, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities, who set a year-end target of 68,000, said, "The market could temporarily approach its all-time high, but political and economic uncertainty in Japan and the United States cannot be ignored."
[email protected] Reporter