Goldman Sachs raises TOPIX target to 4,500 on weaker yen outlook

Goldman Sachs raised its TOPIX 12-month target to 4,500, implying about 12% upside from the index's close of 4,011.31.

The weaker yen will bolster corporate earnings for Japanese exporters and multinationals, Goldman Sachs analysts said in a research note dated July 24. The bank's foreign exchange team now projects the dollar to trade at 162 yen in three months, 163 yen in six months and 165 yen in 12 months.

The bank also raised its 3-month and 6-month targets to 4,200 and 4,300, up from 4,100 and 4,200. TOPIX earnings per share is forecast to expand 13% in fiscal 2026 to 228 yen, followed by 11% growth in fiscal 2027 and 9% in fiscal 2028. Annual dollar-yen assumptions were adjusted to 162 for fiscal 2026, 160 for fiscal 2027 and 155 for fiscal 2028.

The revised target comes as the TOPIX has pulled back just 2% from its June record high, outperforming regional peers. Valuations have consolidated within a 16 to 17 times forward earnings range, leaving room for long-term expansion, the bank said.

Goldman Sachs reiterated an overweight stance on cyclical and financial sectors including Machinery, IT & Services, Banks, Electrical Appliances and Steel. It maintained an underweight position on defensive sectors such as Utilities, Foods, Pharmaceuticals and Transport.

Capital flows into Japanese equities showed sharp regional divergence in June. North American investors were net buyers of 600 billion yen in Japanese shares, while European investors sold 1.5 trillion yen. Mid-July exchange data showed foreign investors as net sellers of 286 billion yen in cash equities, with domestic retail and institutional buyers absorbing 407 billion yen and 64 billion yen, respectively.

Among individual stocks, Mitsubishi Corp and Inpex both gained 11% over the week, while Ibiden added 11% and Namura Shipbuilding rose 13%. On the downside, Cover Corp plunged 18%, Takashimaya slid 10% and Mitsubishi Motors declined 9%.

The target upgrade signals Goldman Sachs expects yen weakness to persist as a structural tailwind for Japanese equities. Investors will watch the Bank of Japan's next policy meeting for any shift in monetary stance that could alter the currency trajectory.

This article is for informational purposes only and does not constitute investment advice.