TOKYO: Japan’s Nikkei share average will rise 4.6 per cent by end-June based on the view that Japanese firms will revise up their outlook once uncertainties over US tariff policy are cleared, according to equity strategists in a Reuters poll.
The Nikkei is forecast to trade at 40,000 at the end of June, according to the median estimate of 19 analysts polled Feb 13-25, from Tuesday’s close of 38,237.79. It is forecast to trade at 42,500 by end-year, up over 11 per cent.
Gains on Japan’s benchmark equity index have been capped so far this year as investors assess the impact of US President Donald Trump’s tariff threat to global businesses.
“Japanese firms’ outlook for this year may be modest initially, but once they have a clearer view of Trump’s tariff plans, their outlook may turn strong,” said Yugo Tsuboi, chief equity strategist at Daiwa Securities, who predicts the Nikkei to trade at 43,000 at end-June.
Tsuboi expects local companies to report record profits for the fiscal year starting in April, and said the Nikkei could go up about 10 per cent within three months.
While Trump has announced tariffs on several major US trading partners since returning to the White House last month, he has not yet directly targeted Japan.
But Japanese firms, such as automakers, could significantly be impacted by tariffs as many of them make products at factories in Canada or Mexico.
The Bank of Japan’s interest rate policy will also be key for the Nikkei, strategists said.
There are growing expectations the BOJ will raise policy rates higher and faster amid stronger growth in Japan’s economy.
The BOJ is expected to lift its policy rate, currently 0.50 per cent, to at least 0.75 per cent this year, a separate Reuters poll showed.
“Once the market finds out when the rate … will peak, the Nikkei will rise as foreign investors will come back to the Japanese market,” said Kiyohide Nagata, chief strategist at Tokai Tokyo Intelligence Laboratory, who sees the Nikkei at 41,000 at end-June.
Masayuki Kubota, chief strategist at Rakuten Securities, says the Nikkei could fall about 10 per cent if potential US tariff plans cause a trade war.
“Global manufacturers, mainly automakers, will be hit and the economy will deteriorate,” Kubota said.
Strategists had mixed views about corporate earnings growth for 2025, with some expecting it will accelerate this year because the rising prices will boost profits.
Some predicted growth will slow because of the yen’s gain against the dollar.
Hiroshi Namioka, chief strategist and fund manager at T&D Asset Management, said corporate performance significantly improved due to a weaker yen this fiscal year, but it is hard to expect this to happen in the coming year.
The yen hit a 2-1/2-month high last week. A stronger Japanese currency tends to hurt shares of exporters, as it decreases the value of overseas profits in yen terms when firms repatriate them to Japan.
