Nikkei 225 at an all-time high: what’s next for Japanese stocks?

Nikkei 225 has rallied nearly 50% over the trailing twelve months but Kei Okamura continues to see further upside in Japanese stocks.

Why is Okamura bullish on Nikkei 225?

The senior vice president and portfolio manager of Neuberger Berman is constructive on Japan’s benchmark stock market index on “relatively good economic outlook”.

He does expect an increase in wages moving forward and sees the inflation side of things serving as a catalyst for Nikkei as well.

Japanese stocks have been in focus ever since Warren Buffett revealed to have increase his stake in all five of the country’s largest trading companies as Invezz reported here.

The legendary investor known broadly as the “Oracle of Omaha” now holds between 7.5% and 8.4% of Sumitomo Corp., Itochu Corp., Mitsui & Co., Marubeni Corp., and Mitsubishi Corp.

What else could help Japanese stocks?

Neuberger Berman’s Okamura expects “capital management reforms” to be a tailwind for Japanese stocks as well.

On CNBC’s “Worldwide Exchange”, he attributed continued strength in Nikkei 225 to geopolitical tensions particularly in Europe and the Middle East. Much like the U.S. – Okamura expects “to see a broadening out of the rally into small-to-medium-sized” stocks in Japan as well.

Sectors that Neuberger Berman is bullish on include industrial, communication services, and financials, in particular, as it could benefit from “potential normalization of the monetary policy”.

Kei Okamura, however, recommends that investors pick individual stocks within these sectors instead of diving head first into the entire space. Institutional investors, he added, are “increasingly getting interested” in Japan’s stock market which may unlock further upside if they choose to “deploy capital” in the world’s fourth-largest economy.