Can Japan’s bumper year continue?
The Topix index is up 19 per cent so far this year but the return of inflation means this may not continue (Reuters/Kim Kyung-Hoon)
It seems nothing, not even a capricious Trump, can stop the rise of Japanese equities right now.
The Topix index is up 19 per cent so far this year. That’s a greater return than the S&P 500.
There was a moment when investors feared it might all come to a halt. In the wake of the Trump administration’s “reciprocal” tariffs, market sentiment towards Japan declined.
Yet according to Schroders’ quarterly bulletin - published at the end of Q2 2025 - things improved after trade negotiations with China and several other countries began yielding positive results. Now, it seems, everyone wants a piece of Japan’s equity pie.
In August Coutts Family Office told MandateWire, AOX’s sister publication, it had been increasing exposure to Japanese equities and that it viewed Japan positively “in the shorter term”.
Capital Generation Partners, another family office based in London, said that the equity market in Japan presents “a lot of reasons for positivity” in terms of cooperative governance reform, corporate earning potential, for return on equity to increase, and benefit from currency exposure in a world where the yen may be appreciating value.
And it’s not just family offices getting in on the action. Alliance Witan, a UK investment trust, appointed Dalton Investments, an investment manager known for its expertise in Japanese equity, to select stocks for its global equity portfolio.
Can this continue? Much depends on how Japan’s central bank will react to the return of inflation which continues to be above target. And how new prime minister Sanae Takaichi will address the cost of living without cooling the economy.