A Nomura Securities strategist explains Japanese equity trends with a focus on TOPIX and Yomiuri 333, rather than relying solely on the Nikkei average. Against the backdrop of the outlook and supply-demand conditions as of the end of 2026, the importance of diversified investment is being reaffirmed.
As the Nikkei average alone cannot capture the full picture of the Japanese equity market, attention should also be paid to TOPIX and Yomiuri 333. Upward revisions to TOPIX’s EPS outlook, a decline in its PER and a lower Nikkei-to-TOPIX ratio are cited as assumptions for this analysis, while the main scenario through the end of 2027 envisages TOPIX reaching new highs. The fact that the year-to-date return of Yomiuri 333 has come to a level similar to that of the Nikkei is also seen as a factor reaffirming the importance of diversification.
TOPIX is said to tend to enter a rebound phase even after periods when credit-related unrealized losses deteriorate to levels not seen since spring 2020. Inflows into funds reflecting the investment flows of US investors, as well as changes in GPIF’s domestic equity allocation in the Japanese equity market, are also mentioned. Changes in supply-demand conditions and investment policies are cited as factors supporting Japanese equities.
In addition, the emergence of low-beta strategies among domestic investment trusts has been noted, and diversified investment is expected to remain important from a risk-control perspective. The outlook for Japanese equities is reportedly likely to be shaped by a combination of factors, including the effects of rebalancing, trends in AI-related stocks and changes in market themes following the US midterm elections.