Japanese stocks have witnessed significant gains since the beginning of the year, propelling the Nikkei 225 index past the 38,000 mark for the first time since 1990.
Analysts at Citi think the rally is not over yet and expect Japanese equities to achieve record highs this year. However, the upsurge has surpassed their expectations, leading them to believe that these stocks may meet their projected targets earlier than initially anticipated.
As such, analysts raised the price targets on two major Japanese indexes.
“Based on the current environment, we maintain our bullish stance and raise our targets for 2024 highs to 3,100 on TOPIX and 45,000 on the Nikkei 225,” they wrote.
The new price objectives imply 19.6% and 18% upside for TOPIX and Nikkei, respectively.
Citi’s bullish thesis hinges mainly on three key catalysts, including the strength of the US economy and equity market, the higher chance of continued accommodative monetary policy by the Bank of Japan, and robust fund inflows into the market.
“Assuming the current levels of US equities and the USDJPY rate, to catch up with US equities on a dollar basis the Nikkei would have to rise to 38,500–40,000,” analysts said.
“Thus if US equities remain strong and the USDJPY rate remains high, we think Japanese equities could soon reach an all-time high,” they added.