Goldman Sachs noted in a July 24 report that raising the 12-month target price of the Topix to 4,500 points from 4,400 points, compared with last Friday's close of 4,011.31 points, meansAbout 12% upside。 At the same time, the bank raised its 3-month and 6-month target prices simultaneously,To 4200 points and 4300 points respectively。 The core logic of this adjustment lies in the exchange rate expectation-Goldman Sachs' foreign exchange team expects the USD/JPY to rise to 165 in the next 12 months, and the continued weakening of the JPY will directly push up the earnings performance of exporters and multinational enterprises.
Goldman Sachs forecasts that Topix EPS will grow 13% to 228 yen in fiscal 2026 and record 11% and 9% growth in the following two years.Although the uncertainty of the global AI outlook and geopolitical tensions may bring market volatility in the short term,Goldman Sachs pointed out that the Topix Index only pulled back by about 2% compared with the historic high in June, showing obvious relative resilience.
Exchange rate expectations drive price target upward
The core driver of this target price increase comes from Goldman's latest judgment on the yen movement. The bank's foreign exchange team expects that,The USD/JPY exchange rate will reach 162 in 3 months, 163 in 6 months, and 165 in 12 months.The corresponding annual exchange rate assumptions are adjusted accordingly: 162 for FY2026, 160 for FY2027 and 155 for FY2028.
The continued weakening of the yen is a direct earnings tailwind for Japanese exporters and multinational conglomerates.Based on the above exchange rate path, Goldman Sachs forecasts that Topix EPS will grow by 13% to 228 yen in FY2026, a further 11% in FY2027 and 9% in FY2028, showing a clear logical chain of upward earnings revision.
Goldman Sachs acknowledged that the uncertainty of the global AI demand outlook and geopolitical frictions could weigh on market sentiment in the short term. However, the bank also pointed out that the Topix Index has only pulled back by about 2% compared with the all-time high set in June, which is significantly better thanAsia-PacificOther markets in the region.
The current valuation has stabilized in the range of 16 to 17 times the expected P/E, and Goldman Sachs believes that there is still plenty of room for long-term expansion. This valuation level provides fundamental support for the target price increase and is one of the important bases for Goldman Sachs to maintain its optimistic stance in the medium term.
In addition, the capital flow of Japanese stock market appears obvious regional differentiation pattern. June data showed that North American investors, mainly the United States, bought net Japanese stocks of 600 billion yen; European investors, who traditionally prefer value strategies, sold a net 1.5 trillion yen in the same period, and the two directions are diametrically opposite.
The latest exchange data in mid-July further showed that foreign investors sold a net 286 billion yen in spot shares, while domestic retail investors and localFinancial institutionsThe net purchases of 407 billion yen and 64 billion yen respectively effectively undertook the selling of foreign capital, showing the supporting role of Japanese domestic funds in the market.
