Japanese Stocks Expected to See Improved Return on Equity in 2025: BofA
Bank of America (BofA) has issued a note predicting that Japanese stocks will experience an improved return on equity in 2025. The brokerage firm believes that the limited impact of U.S. trade tariffs on China and a pick-up in domestic growth will contribute to this improvement.
In their note, BofA pointed out that Japanese markets have been declining in recent weeks due to uncertainty over what a Trump administration will entail for U.S. policy. However, this trend is unlikely to continue as Japanese companies begin to implement share buybacks.
Furthermore, the brokerage firm notes that the COVID-19 pandemic has reduced Japanese firms’ reliance on China, increasing their dependence on the U.S. instead. This reduced exposure to trade headwinds between the U.S. and China is expected to limit the negative impact on Japanese stocks in 2025.
On the domestic front, BofA expects strong wage negotiations in Shunto to result in significant hikes early next year, supporting private spending. Additionally, the brokerage firm believes that Japanese corporate earnings will increase, pushing up return on equity.
BofA recommends focusing on stocks that will benefit from high inflation and are not pressured by rising interest rates. They also suggest considering companies with better corporate reforms and limited exposure to Trump’s tariff plans.
