Japanese Stocks Headed for Positive 2025, BofA Says
Bank of America (BofA) analysts have made a positive forecast for the Japanese stock market in 2025, expecting improvements in the domestic economy to offset the impact of US trade tariffs. The brokerage predicts that the Nikkei 225 index will finish the year at 43,500 points, representing a 10% increase from current levels, while the TOPIX index is expected to reach 3,050 points, also a 10% rise.
The analysts note that 2025 will be the first year in 30 where inflation becomes entrenched in the Japanese economy, driven by higher wages, economic stimulus measures, and tax reforms. The impact of US trade tariffs is expected to be front-loaded, with an improvement in domestic conditions helping to offset these headwinds.
In the near-term, BofA recommends prioritizing sectors with earnings stability and exposure to domestic demand, including financials, construction, services, IT, games, and broadcasters. The brokerage expects a “full-scale” rally in cyclicals and China-related sectors in the second half of 2025.
The impact of US trade policy is expected to be limited, with tariffs front-loading the impact on stock valuations, while tax cuts will provide a boost to sentiment later in the year. Overall, BofA’s forecasts are more optimistic than those of UBS, which expects a 5% upside in 2025.