Japanese equities rose sharply in the year after the Takaichi administration took office. Foreign capital inflows exceeded ¥8 trillion, and the balance between the administration's policies and fiscal discipline has become a focus for investors.
Over the past year, the Japanese equity market saw the TOPIX rise 31% and the Nikkei Average rise 48%, while foreign capital inflows expanded significantly to more than ¥8 trillion. The buying momentum immediately after the administration took office also spread to some policy-related stocks, but share price performance has since diverged by theme.
Based on analysis by Goldman Sachs Research, a comparison of performance across major themes such as defense, AI and semiconductors, banks, and U.S. reindustrialization shows that investors are seeking to assess the implementation of policies and the maintenance of fiscal discipline.
Foreign capital inflows exceeded ¥8 trillion, while the forward P/E of the TOPIX rose temporarily from approximately 15 times when the administration took office to above 17 times after the House of Representatives election. Average daily trading value for TOPIX constituents increased substantially toward the summer, and cumulative NISA purchases reached ¥12.8 trillion year to date.
The question going forward is how to implement an ambitious growth strategy while maintaining fiscal discipline. Foreign capital inflows and trends in equity valuations could affect the outlook for corporate earnings.