Japan stocks have had a record run: Goldman Sachs sees them pushing higher

Japan stock have already had a record run, and one of the largest Wall Street banks believes their rally is far from over yet.

Goldman Sachs strategists have raised their 12-month target for the benchmark Topix index to 4,400, indicating potential upside of more than 10% from current levels.

According to them, renewed foreign interest, solid corporate earnings, and increasing shareholder returns make Japanese stocks one of the most compelling trades in global markets right now.

Why Goldman Sachs remains bullish on Japan stocks

In their latest research report, Goldman Sachs strategists said the earnings story for Japanese firms keeps getting better.

On Monday, they revised their fiscal 2026 earnings per share (EPS) growth estimate for Japanese companies from 7% to 11%.

The bank then sees another 11% growth next year, followed by a 9% increase in fiscal 2028.

That's a durable, multi-year profit expansion story, not a one-quarter blip.

Valuation is another compelling piece of the puzzle. The Middle East tensions – earlier this year – tanked Topix’s forward multiple (price-to-earnings) to about 15x.

However, “with the environment for foreign flows and earnings revisions now appearing far more constructive,” Goldman Sachs sees its 17.5x target for the benchmark index as rather reasonable.

This means the market, on a valuation basis alone, has meaningful room to re-rate higher.

Rising shareholder returns make Japanese stocks attractive

Goldman Sachs is bullish on Japan stocks also because foreign investors have been flooding back into Topix at a rapid pace – pouring over $100 billion into them since April 2025.

This marks a dramatic reversal from the years when overseas investors treated the region’s equities as an afterthought.

Meanwhile, Japanese firms have undergone a quiet but powerful transformation in how they reward shareholders; total shareholder returns by Topix-listed businesses reached 43 trillion yen in fiscal 2025.

This number reflects both generous dividend payouts and an “aggressive” wave of share buybacks that continued through the most recent earnings season.

This shift, long demanded by both activist investors and the Tokyo Stock Exchange (TSE) itself, is fundamentally changing how global money managers perceive Japanese equities.

It’s not too late to invest in Japan stocks

Ultimately, the confluence of robust institutional reforms, surging foreign capital, and “resilient” earnings growth suggests that Japan’s equity market is undergoing a structural re-rating rather than a temporary spike.

By aggressive buybacks and enhanced dividend payouts, corporate Japan has successfully aligned itself with shareholder interests, shedding its historical reputation for capital inefficiency.

Backed by Goldman Sachs’ upgraded growth forecasts and an encouraging valuation multiple, the Topix is fundamentally transformed in the eyes of global asset managers.

As overseas investors continue to relocate capital into the region, Japan firmly establishes its position as a multi-year cornerstone of global portfolio growth.