Nikkei 225 Continues to Hit 33-Year High: 7 Must-Select Japanese Stocks and Investment Guide

Nikkei Breaks 40,000 Points: How Long Can the Rebound Logic Hold?

In the first half of 2025, the Japanese stock market experienced a rapid decline followed by a swift recovery. On June 30, the Nikkei 225 Index surged to 40,487 points, reaching a nearly one-year high. What is driving this rebound? Should investors continue to be optimistic?

Market valuations of Japanese companies are being rewritten. During the April tariff impact, the P/E ratio of Japanese stocks briefly fell to 12x, making it much cheaper than major global markets. As the market re-evaluates fundamentals, the P/E ratio gradually rebounded to 13x, which is the main driver of this valuation recovery.

Another force comes from the reallocation of overseas funds. The wave of “reducing holdings in U.S. stocks” is growing, and international investors are seeking new capital destinations. Relatively undervalued Japanese stocks have become a key target. The corporate governance reforms promoted by the Tokyo Stock Exchange are also showing results—companies are increasing dividends and executing share buyback plans, with improved fundamentals boosting market confidence.

The global tech industry recovery is also adding fuel—semiconductors and precision equipment stocks in Japan performed brilliantly. But whether this rally can continue depends mainly on the direction of the Bank of Japan’s monetary policy and whether global investors’ risk appetite will change.

7 Selected Japanese Stocks: From Industrial Hidden Champions to Century-Old Brands

Keyence (6861.JP): The Hidden Champion of Industrial Automation

Keyence is already renowned in industrial automation but remains relatively unknown to the public. Founded in 1974, this company specializes in high-value sensors, vision systems, laser marking, and measurement instruments, with products sold in 46 countries worldwide.

The company focuses on three main areas: industrial automation, precision measurement, and process control. These solutions are ubiquitous in high-end manufacturing such as semiconductors, automotive, and healthcare, and are standard in smart factories.

In FY2024, the results were impressive—revenue of 1.059 trillion yen, operating profit of 549.78 billion yen, and net profit of 398.66 billion yen. Wall Street analysts’ 12-month average target price is 74,282 yen, compared to the current stock price of 56,800 yen, potential upside of 30%.

Tokyo Electron (8035.JP): A Global Semiconductor Equipment Giant

Tokyo Electron is a key supplier for semiconductor manufacturing, with a market cap of 12.6 trillion yen, providing core equipment such as wafer cleaning and coating to giants like Samsung, TSMC, and Intel.

In FY2024, growth was strong—consolidated revenue of 2.43 trillion yen (up 32.8% YoY), with overseas sales up 36.2% to 2.24 trillion yen. Cost control was excellent, with gross profit rising 38.1% to 1.15 trillion yen, and gross margin improving by 1.7 percentage points to 47.1%. Operating profit surged 52.8% to 697.32 billion yen, with EPS jumping from 783.8 yen to 1,182.4 yen.

Jefferies analysts maintain a “Buy” rating with a target price of 32,000 yen, leaving significant upside.

Mitsubishi Heavy Industries (7011.JP): A Century-Old Pillar of Defense Industry

Mitsubishi Heavy is a Japanese industrial fossil, originating from the Mitsubishi Shipyard established in 1884. Starting with shipbuilding and heavy machinery, it has expanded into aerospace, energy equipment, and industrial machinery, representing Japan’s highest manufacturing technology.

The company estimates FY2025-26 operating profit will grow 9.6% to 420 billion yen, driven mainly by aerospace and defense profits increasing by 40%; energy systems also see 17% profit growth. Wall Street analysts’ 12-month average target price is 3,743.76 yen, compared to the current 3,185 yen, potential upside of 17.54%.

Nintendo (7974.JP): Long-term Value in the Gaming Industry

Nintendo’s FY2024 revenue declined 30.3% to 1.16 trillion yen, with operating profit plunging 46.6% to 282.5 billion yen. This is due to the Switch’s current lifecycle nearing its end, and the pre-announcement of the next-generation Switch 2 also dampening consumer demand.

However, market analysts believe the gaming industry’s growth continues to outpace global GDP, driven by expanding player bases and diversified monetization models (subscriptions, virtual items, seasonal content). The 12-month average target price from 11 Wall Street analysts is 14,035.27 yen, with a high of 20,780 yen, leaving room for growth compared to current prices.

Sony Group (6758.JP): Pioneer in Content Ecosystem Transformation

Sony’s latest quarter saw net profit grow 4.6% YoY to 197.7 billion yen, but the new fiscal year’s net profit is expected to decline 13%, mainly due to U.S. tariff impacts.

Highlights include the profit-driving content divisions—acquisitions of game studio Bungie, anime platform Crunchyroll, and collaboration with Kadokawa Group to develop IP derivatives, which are already paying off. Hardware sales face challenges, with PS5 sales revised down from 18.5 million to 15 million units.

Sony executives have indicated measures to counter tariffs—diversifying production bases and adjusting pricing strategies—demonstrating resilience through “software and hardware” transformation. The 12-month average target price from 9 Wall Street analysts is 4,389.49 yen, compared to the current 3,607 yen, potential upside of 21.69%.

Mitsubishi Corporation (8058.JP): Buffett’s Favorite

Mitsubishi Corporation is one of Japan’s five major trading companies and a favorite of Warren Buffett’s Berkshire Hathaway. Buffett started investing in these five trading firms in July 2019, increasing holdings to 8.5%-9.8% by June this year. Buffett has also stated he would “never sell these Japanese stocks for 50 years.”

The FY2025 outlook shows revenue of 18.6 trillion yen, down 4.9% YoY, but pre-tax profit grew 2.3% to 1.4 trillion yen, and net profit of 950.7 billion yen, slightly down 1.4%, demonstrating resilience of Japan’s integrated trading companies.

Current stock prices are somewhat high; it’s advisable to wait for a correction to a reasonable level before entering. With Buffett’s continued backing, long-term investment value remains attractive.

( Hitachi (6501.JP): From Electrical Appliance Manufacturer to Infrastructure Provider

Hitachi has a history of 111 years; older consumers may remember its TVs, VCRs, and batteries. Recently, it spent $9.6 billion acquiring U.S. digital services company GlobalLogic, aiming to shift toward software services.

The Hitachi Group is known for M&A strategies, having exited most consumer electronics markets and sold low-growth businesses like power tools and chemicals. Its current strategy is clear: retain core businesses such as rail transit and auto parts, and focus on industrial digitalization services to help manufacturing clients upgrade digitally.

Although impacted by tariff policies, the stock quickly rebounded and is near a 20-year high. Hitachi’s clear transformation strategy and strong execution have proven market recognition.

3 Major Ways for Taiwanese Investors to Buy Japanese Stocks

) Method 1: Direct Investment in Japanese Stock Index

The simplest way. While returns may be less than individual stocks, it offers the highest certainty—if Japan’s stock market rises, investors will gain stable returns. The Nikkei 225 covers 225 top listed companies, representing the most significant.

In the first half of this year, the Nikkei 225 first fell to 31,136 points (a low over a year ago), then rebounded strongly amid valuation recovery, capital flows, and fundamental improvements. Although it’s uncertain how long this rebound can last, Japanese stocks have shaken off excessive caution and can be included in asset allocation.

Investors can trade index prices via CFD, supporting long and short positions with leverage from 1x to 200x, starting with as little as USD 50. Registration now supports NTD deposits and offers a chance to receive a USD 100 bonus.

Method 2: Buying Japanese Stocks via U.S. Stocks

Many well-known Japanese companies have issued ADRs in the U.S., such as Toyota (TM.US), SoftBank (SFTBY.US), Sumitomo Mitsui (SMFG.US), Nintendo (NTDOY.US), etc. An U.S. brokerage account is sufficient to invest, with trading synchronized to the Japanese stock market.

Method 3: Taiwanese Brokerage Re-Entrusted Trading

YuanDa Securities and Fubon Securities support re-entrusted trading. The process is relatively complex, with limits on share quantities and higher fees, requiring consultation with customer service.

Investment Outlook for Japanese Stocks: Short-term Volatility vs. Long-term Positioning

In the short term, the trend of Japanese stocks mainly depends on trade policies. While tariff reductions may trigger a rebound, the global economic slowdown and weak exports may cause the Nikkei to fluctuate between 37,000 and 38,000 points. Foreign capital inflows are mainly valuation arbitrage, and how long hot money can sustain remains uncertain. To capture short-term volatility, CFDs are a good choice—zero commission for short-term trading, with very tight spreads.

Looking toward 2026, the shift in BOJ’s monetary policy could be a key turning point. If the BOJ resumes rate hikes, financial stocks could see valuation improvements, and Yen normalization could enhance corporate profitability. The key is whether the BOJ’s rate hike pace can align with global economic conditions.

For the Nikkei to break through 40,000 points and continue upward, multiple positive factors need to align—corporate governance reforms boosting ROE, emerging industry competitiveness, and substantial improvements in US-Japan trade relations. However, these conditions are not yet fully mature, and investors should remain patient and flexible.