Earnings forecasts for fiscal 2027 for the Tokyo Stock Exchange Prime Market were revised upward. Small-cap companies with strong earnings that appear to have lagged behind are becoming increasingly attractive investments. The backdrop was strong April–June earnings, despite concerns over excessive AI investment and the situation in the Middle East.
The Nikkei 225 rebounded sharply after plunging last week. Although the turmoil in semiconductor-related stocks continued to weigh on the market, Japanese equities underwent a broad reassessment against a backdrop of strong recent corporate earnings.
Earnings for April–June 2026 were stronger than expected, and more companies revised their full-year earnings forecasts upward, influencing investment strategies for Japanese equities.
Net income for the April–June period among 841 major companies listed on the Tokyo Stock Exchange Prime Market rose by approximately 70% year on year. Performance was strong across all industries, including non-manufacturers, led by semiconductor-related manufacturers.
The author views Japanese equities as undervalued with substantial long-term upside potential, and will focus in particular on small-cap companies with strong earnings that appear to have significantly lagged behind, introducing individual stocks in future articles.