After years in the shadow of international markets, Japan is experiencing an impressive stock market comeback. Experts expect 2026 to be a key year for the Nikkei and TOPIX.
• Japan’s stock market starts a comeback at the end of 2025
• Experts have a positive outlook for 2026
• BofA with a positive outlook for Japan’s stock market
Japan stocks start a comeback in 2025
After years of stagnation, the Japanese stock market made an impressive comeback. Driven by a new political orientation, fiscal stimulus and structural reforms, the leading indices climbed to historic highs in autumn 2025 – the Nikkei 225 exceeded 48,000 points for the first time and the TOPIX also set records. “This reflects the growing confidence of the international community Financial markets in Japan’s new political direction,” said Mathias Beil, head of private banking at Hamburg-based Sutor Bank, according to extraETF. Prime Minister Sanae Takaichi is relying on expansive spending programs, growth investments and modernization of key industries – from semiconductors to defense.
Growth, yen stabilization and new impulses for investors
The momentum is also supported by stronger domestic economic activity and reforms of corporate structures. The government is investing heavily in artificial intelligence, semiconductors and defense, while rising wages and falling inflation are boosting consumption. At the same time, share buybacks and improved corporate governance are strengthening the confidence of international investors. The GDP forecast for 2026 was raised to 0.9 percent growth, while government spending came in at $22.5 trillion yen exceed expectations. “Although geopolitical risks such as US tariffs, US-China trade relations or the situation in Taiwan remain, we do not expect a slide into recession,” continued Beil.
However, the volatile yen remains crucial for foreign investors. Experts expect the yen to stabilize slowly in 2026 as a result of cautious interest rate increases by the Bank of Japan.
BofA: Strong outlook for Nikkei and TOPIX
According to Bank of America, the Japanese stock market is starting 2026 with a positive tailwind. According to Investing.com, analysts expect macroeconomic factors such as rising real wages and improved corporate profitability to support prices over the course of the year. In the base scenario, the bank forecasts a TOPIX level of 3,700 points and a Nikkei of 55,500 points at the end of 2026.
A key growth driver is real wage growth, which has regularly exceeded expectations since 2023. As inflation pressure eases due to falling food prices and effective policy measures, rising wages could strengthen the domestic economy and trigger self-sustaining growth dynamics.
The international environment also supports the positive outlook: Bank of America expects an economic recovery in the USA, possible tax cuts and deregulation after the 2026 midterm elections. Japanese corporate investments in the USA could benefit from this – especially in the areas of energy, robotics, AI and factory automation.
Nevertheless, the bank points to equally high risks compared to the base scenario: higher interest rates, a possible weakness of the yen as well as rising US yields or AI-related employment effects could dampen developments.
Editorial team finanzen.net
