The start of an inflationary regime, coupled with the Tokyo Stock Exchange’s valuation reforms, will boost Japanese stocks to their record high as early as the first half of 2025, according to BofA Securities.

(May 31): The start of an inflationary regime, coupled with the Tokyo Stock Exchange’s valuation reforms, will boost Japanese stocks to their record high as early as the first half of 2025, according to BofA Securities.

“We believe the stock-market high of 1989 set during the Bubble Economy will come into sight again, should a core consumer price index of 1.5% or more takes hold in Japan and the return on equity rises into the double digits,” chief Japan equity strategist Masashi Akutsu wrote in a note on Tuesday (May 30).

BofA’s projections echo that of other Wall Street firms, which see further room for the rally in Japanese stocks to run. Strong interest from foreign investors, solid earnings, and a weak yen should continue to support a climb in the Topix Index.

While equities may hit a speed bump in the near term, BofA said there is “no need to be bearish if the market rises in line with fundamentals”. The current investment environment remains favourable post-reopening of the economy and with the strengthening of inflation.

The Topix Index closed 1.3% lower on Wednesday, as China’s weak manufacturing data weighed on sentiment.