A Nomura Securities strategist has revised the outlook for Japanese equities. The view that TOPIX will gradually renew its highs has been maintained, while the timing of a new high for the Nikkei Average has been pushed back to year-end 2028 or later.
The assumption that TOPIX will gradually renew its highs has been maintained, with the index expected to reach 4,800 at year-end 2028. The forecast for the Nikkei Average to renew its high has been revised from June 2026 to year-end 2028 or later. A temporary correction after the US midterm elections is not considered excessive, and TOPIX is expected to remain prone to returning to its pre-crash level during periods of economic expansion.
The top-down EPS outlook was revised slightly upward to +20.8% for fiscal 2026, +9.4% for fiscal 2027 and +6.8% for fiscal 2028. Factors include positive second-quarter results, upside from share buybacks and changes in index constituent weights. The impact of higher crude oil price assumptions is considered manageable through increased volumes and price increases. Even a significant downside in capital expenditure by US hyperscalers is expected to have a limited impact.
The assumptions for PER and the NT ratio were also revised. TOPIX PER is now assumed at the low 14x range, down from the previous 16–17x, at around 15x in six months and approximately 15.5x from the second half of 2027 onward. The Nikkei Average's NT ratio is expected to decline to around 15.5x. The upper end of the range has been set on the basis of TOPIX at 4,000–4,800 and the Nikkei Average at 62,000–72,000.
Banks have been reinstated as a sector of interest, while real estate has been removed. Based on the policy outlook and market supply and demand over the next 2 years, the sector assessment is shifting toward banks as the central focus, with electrical equipment and machinery also in focus.