Japanese Stock Investment Guide: Deployment Strategies After the New High of 40,000 Points [Analysis of 7 Selected Targets]

In the first half of 2025, the Japanese stock market experienced a rollercoaster ride. Amid pessimistic economic expectations and uncertainties in global trade policies, the Nikkei Index once fell to a low of 31,136 points, only to rebound strongly afterward. By the end of June, the Nikkei 225 had bounced back to 40,487 points, hitting a new high in recent years. What underlying logic is hidden behind this wave of market movement? How should investors seek opportunities in the Japanese stock market?

Why Did Japanese Stocks Suddenly Strengthen? Whether the Uptrend Can Continue Is Key

The core drivers behind this rebound in the Japanese stock market stem from the convergence of two major factors. First, the market’s assessment of Japanese corporate profitability is adjusting. In April, global markets panicked over tariff concerns, causing the Price-to-Earnings ratio (P/E) of the Nikkei to drop to 12 times, making it the most undervalued among major global markets. As investors gradually realized that the economic situation was not as dire as expected, the P/E ratio slowly climbed to around 13 times, and corporate value regained market recognition.

Second, international capital is reallocating assets. Under the dual pressures of high valuations in the US stock market and a slowing global economy, overseas institutional investors are turning their attention to the more attractive valuations of the Japanese market. This is not only a technical rebound but also reflects a deeper structural trend: the corporate governance reforms promoted by the Tokyo Stock Exchange are beginning to show results, with more companies increasing dividends, implementing share buyback plans, and improving operational fundamentals.

Meanwhile, the recovery of the global technology supply chain has also brought new growth momentum to Japanese companies. Japanese firms in semiconductor manufacturing equipment, precision industrial parts, and related fields are benefiting from global industry upgrades, showing impressive performance.

It is important to note that whether this market rally can continue depends on multiple variables: the future monetary policy direction of the Bank of Japan, the trajectory of trade relations between Japan and the US, and changes in global investors’ risk appetite. In the short term, the Nikkei may fluctuate between 37,000 and 38,000 points. The medium-term success or failure will depend on whether corporate governance reforms can boost ROE and whether emerging industries can develop competitive advantages.

Warren Buffett’s Signal: The Long-term Value of Japan’s Five Major Trading Companies

It is worth noting that Warren Buffett’s Berkshire Hathaway increased its holdings in Japan’s five major trading companies (Mitsubishi Corporation, Mitsui & Co., Itochu Corporation, Sumitomo Corporation, Marubeni) in June this year, raising its stake to between 8.5% and 9.8%. Buffett even declared at the Berkshire Hathaway annual meeting that he “won’t sell these stocks for 50 years,” revealing his firm belief in the long-term value of Japanese stocks.

7 Japanese Stocks Worth Watching

Keyence (6861.JP): An Invisible Giant in Industrial Automation

Keyence is a global leader in industrial automation, specializing in high-value-added products such as sensors, vision systems, and laser markers. Founded in 1974, this company is relatively unknown to the general public but is ubiquitous in high-end manufacturing sectors like semiconductors, automotive manufacturing, and biomedicine.

In fiscal year 2024, its performance was solid, with revenue reaching 1.059 trillion yen, operating profit of 549.78 billion yen, and net profit of 398.66 billion yen. Wall Street analysts’ 12-month average target price is 74,282.41 yen, implying about 30% upside from the current price of 56,800 yen.

Tokyo Electron (8035.JP): A Key Player in the Semiconductor Equipment Supply Chain

Tokyo Electron’s market capitalization has surged to 12.6 trillion yen, making it an important equipment supplier for global semiconductor manufacturers. As chips gain strategic importance in military and civilian fields, demand for its products continues to grow.

In fiscal year 2024, consolidated revenue reached 2.43 trillion yen, up 32.8% from the previous year. Overseas sales grew 36.2% to 2.24 trillion yen, accounting for 92.2% of total revenue. Notably, gross profit increased by 38.1% to 1.15 trillion yen, operating profit soared 52.8% to 697.32 billion yen, demonstrating the effectiveness of its global operations. Analysts maintain a buy rating with a target price of 32,000 yen.

Mitsubishi Heavy Industries (7011.JP): A Symbol of Japan’s Industrial Spirit

Founded in 1884, this century-old enterprise is a living fossil of Japanese heavy industry. Starting from shipbuilding and heavy machinery, it has now become a comprehensive giant spanning aerospace, energy equipment, and industrial machinery.

Supported by strong defense demand, the company expects operating profit for fiscal year 2025-26 to grow 9.6% to 420 billion yen. Aerospace and defense are projected to increase by 40%, and energy systems by 17%. The 12-month average target price from Wall Street analysts is 3,743.76 yen, compared to the current stock price of 3,185 yen, with a potential upside of 17.54%.

Nintendo (7974.JP): A Turning Point in the Gaming Industry

Although fiscal year 2024 revenue declined sharply by 30.3% to 1.16 trillion yen, industry analysts believe this is merely a cyclical adjustment. The gaming industry’s growth rate still surpasses global GDP, driven by expanding player bases and diversified monetization models. Subscription services, virtual items, and seasonal content enable companies to extract more value from each player.

The average 12-month target price among 11 Wall Street analysts is 14,035.27 yen, with the highest reaching 20,780 yen, indicating market expectations for a rebound in the gaming sector.

Sony Group (6758.JP): A Practitioner of Content Ecosystem Transformation

Sony is transforming from a hardware manufacturer to a content service provider through acquisitions like Bungie and Crunchyroll. Its latest quarterly net profit increased by 4.6% year-over-year to 197.7 billion yen, with music and film businesses leading profit growth.

Although PS5 sales are expected to be revised down to 15 million units, and US tariffs could cut 100 billion yen in operating profit, Sony’s flexible response capabilities are impressive. The average 12-month target price from analysts is 4,389.49 yen, compared to the current price of 3,607 yen, with a potential upside of 21.69%.

Mitsubishi Corporation (8058.JP): Buffett’s Favorite Japanese Trading Company

As one of Japan’s five major trading companies, Mitsubishi Corporation is favored by Buffett for its high capital efficiency and focus on shareholder interests. For fiscal year 2025, revenue is projected at 18.6 trillion yen, a 4.9% decrease from the previous year, but pre-tax profit grew 2.3% to 1.4 trillion yen, demonstrating resilience in Japanese general trading.

The current stock price is relatively high; investors are advised to wait for a correction to a more reasonable level before entering. With Buffett’s continued support, long-term investment prospects remain optimistic.

Hitachi (6501.JP): A Stunning Transformation from Manufacturer to Digital Service Provider

This Japanese industrial giant with 111 years of history is undergoing a radical transformation. It has invested $9.6 billion to acquire the US digital services company GlobalLogic, aiming to accelerate industrial digitization and help manufacturing clients upgrade digitally.

Hitachi has exited most consumer electronics markets and now focuses on heavy machinery such as rail transit equipment and auto parts, while also accelerating its industrial digital solutions. Its stock price is approaching a 20-year high, and its clear transformation strategy and strong execution have earned market recognition.

Three Ways for Taiwanese Investors to Enter Japanese Stocks

1. Direct Investment in Japanese Stock Index

Investing in an index is the most straightforward approach. The Nikkei 225 covers 225 top-listed Japanese companies. In the first half of this year, it first fell to 31,136 points, then rebounded strongly. While the future trend is uncertain, Japanese stocks have at least shaken off excessive caution and can be considered in asset allocation.

You can directly trade index prices via CFD, supporting both long and short positions with leverage from 1 to 200 times, starting with as little as $50.

2. Investing in Japanese Companies via US Stock Channels

Well-known Japanese companies like Toyota ™, SoftBank (SFTBY), Sumitomo Mitsui (SMFG), and Nintendo (NTDOY) issue ADRs in the US. You only need a US brokerage account to trade, which is relatively convenient.

3. Using Taiwan Brokerage’s Re-Entrust Service

YuanDa Securities and Fubon Securities offer re-entrust trading services, but the process is relatively complex, with purchase limits and higher fees. Investors should choose based on their individual circumstances.

Future Opportunities and Risks of Japanese Stocks

In the short term, the performance of Japanese stocks mainly depends on trade policy developments. Tariff reductions could trigger a rebound, but slowing global economy and weak Japanese exports may cause the index to fluctuate. Currently, foreign capital inflows are mainly for valuation arbitrage, and the sustainability of this hot money remains uncertain.

Looking further to 2026, the Bank of Japan’s interest rate hike decisions will be a key turning point. If the BOJ resumes rate hikes, financial stocks could see valuation improvements, and yen normalization could enhance corporate profitability.

For the Nikkei to continue breaking higher, multiple positive factors need to align: corporate governance reforms boosting ROE, emerging industries developing competitive advantages, and substantial improvements in Japan-US trade relations. These conditions are not yet fully in place, but the long-term investment value of Japanese stocks is gradually emerging.