Entering Monday, the MSCI Japan Index was beating the S&P 500 by 850 basis points year-to-date, and the Nikkei 225 and TOPIX indexes were flirting with all-time highs, implying that investors who haven’t been engaged with Japanese stocks and the related ETFs have missed the “easy money.”
In what could be good news for funds such as the Neuberger Berman Japan Equity ETF (NBJP ), some market observers believe Japanese equities are catalyst-rich and could offer more upside in the months ahead. The actively managed NBJP is one of the newest additions to the US-listed Japan ETF market. It also celebrated its first birthday last week.
The bull case for NBJP is understandable, in part due to improving earnings expectations in Japan. In recent commentary on Japanese stocks, Bank of America noted earnings revisions in the Land of the Rising Sun are trending in the right direction following an impressive set of first-quarter results. For investors considering ETFs like NBJP, the earnings trend is crucial because multiples on Japanese stocks have increased. That situation isn’t alarming, provided earnings growth is there to validate those increases.
NBJP Could Be Late 2025 Winner
Advisors and investors considering Japan entries may want to avoid delay. Bank of America believes stocks there are poised to rally into year-end.
“Looking toward the end of 2025, however, we see room for more upside. It is likely that, as we had expected, TOPIX EPS bottomed for both current and next fiscal year forecasts following 1Q results. Expectations for next fiscal year’s earnings recovery are significantly higher than for the current year,” according to the bank.
There are other reasons to consider NBJP over the near-term. As of BofA notes, next month marks the start of the second half of Japan’s fiscal year. That turning of the calendar could bring “more upward revisions to guidance when interim results are announced. This would further improve current fiscal year EPS forecasts,” adds the bank.
NBJP’s sector weights are also noteworthy because in a report out last month, BofA said it’s possible inflation will continue trending higher in Japan – important because the country struggled with decades of deflation – and that could lead to wage gains. With nearly 22% of its roster devoted to consumer cyclical stocks, NBJP could benefit from that scenario.
In fact, BofA highlighted inflation-related sectors and groups with exposure to artificial intelligence (AI) as possible drivers of more gains for broader Japanese indexes. NBJP allocates about 9% of its roster to technology stocks.
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