Japanese Stock Investment Recommendation List | Stock Selection Strategy and Layout Method After Nikkei Breaks 40,000 Points in 2025

Why Is the Japanese Stock Market Rising All the Way Up? Is There Still Opportunity in the Future?

Entering mid-2025, the Japanese stock market experienced a brief pullback in April, followed by a strong rebound in May and June. By the end of June, the Nikkei 225 Index surged to 40,487 points, just one step away from its one-year high. What is driving this rally? Is there still room for continuation? Let’s analyze in depth.

Market Revaluation Logic and Structural Advantages

The core of this upward movement in the Japanese stock market lies in two main supports: ‘Reevaluation of corporate value’ and ‘Fermentation of long-term competitive advantages’.

In April this year, when U.S. tariff policies suddenly changed, global risk assets plummeted. The Nikkei P/E ratio fell to around 12 times, appearing extremely undervalued compared to international mainstream markets. As market participants gradually adjusted overly pessimistic expectations, the P/E ratio recovered to about 13 times, making value discovery the main driving force behind this rebound.

Meanwhile, international capital is adjusting its global asset allocation. The trend of “reducing holdings of U.S. stocks” has begun to emerge, with many overseas institutional investors shifting their focus to the relatively moderate valuation Japanese market. However, this rise is not merely a technical rebound; the modernization reforms in corporate governance promoted by the Tokyo Stock Exchange have played a substantive role. More and more companies are increasing dividends and initiating buyback programs, with fundamentals clearly improving.

Additionally, the global recovery trend in the technology industry chain has benefited Japanese semiconductor and precision equipment stocks, further strengthening market confidence in bullish positions. But whether this can continue ultimately depends on the policy adjustment direction of the Bank of Japan and the shift in global investment risk appetite.

Warren Buffett’s Signal for Deployment

Berkshire Hathaway, Buffett’s company, has been deploying in Japan’s five major trading companies (Mitsubishi Corporation, Mitsui & Co., Itochu Corporation, Sumitomo Corporation, Marubeni) since 2019. In June this year, it announced increased holdings. Considering Buffett’s long-term holding strategy, this increase is particularly significant. He even publicly stated at the Berkshire Hathaway annual meeting that he would “not sell these trading stocks for 50 years,” which demonstrates his confidence in the value of Japanese companies.

Selected 7 Japanese Stocks Recommendations List

Stock Recommendation 1: Keyence (6861.JP)

Keyence, while not as well-known as consumer brands, is a hidden leader in industrial automation. Founded in 1974 by Takemitsu Takizaki in Osaka, the company has adhered to the core philosophy of “design-driven,” focusing on developing high-value automation sensors, vision systems, laser marking systems, and industrial measurement instruments. Although Keyence itself does not manufacture, it sells products through a global direct sales network to 46 countries and regions.

Its products cover three major fields: industrial automation, precision measurement, and process control. They are widely used in advanced manufacturing industries such as semiconductors, automotive manufacturing, and biopharmaceuticals. Smart factories in North America, Europe, and major Asian industrial countries all feature Keyence’s blue logo prominently.

For the fiscal year 2024, the financial performance was steady and reliable, with revenue reaching 1.059 trillion yen, operating profit of 549.78 billion yen, pre-tax profit of 561.01 billion yen, and net profit of 398.66 billion yen.

Five Wall Street analysts’ average 12-month target price over the past three months is 74,282.41 yen, with a high of 80,075.16 yen and a low of 66,235.01 yen. Compared to the current price of 56,800 yen, this suggests an estimated upside of about 30%, making it worth attention.

Stock Recommendation 2: Tokyo Electron (8035.JP)

Tokyo Electron is a key player in the global semiconductor equipment industry, headquartered in Tokyo, with a market capitalization exceeding 12.6 trillion yen. The company mainly supplies wafer cleaning equipment and deposition systems to industry leaders like Samsung, TSMC, and Intel.

In recent years, the strategic importance of semiconductor materials in electronics and defense has continued to rise, boosting demand for related equipment. The fiscal year 2024 showed impressive results, with consolidated revenue of 2.43 trillion yen, up 32.8% from the previous year. Overseas sales were particularly strong, growing 36.2% to 2.24 trillion yen, accounting for 92.2% of total revenue; domestic sales grew modestly by 2.7% to 189.98 billion yen.

Despite a 28.5% increase in sales costs, the company’s cost control was excellent, with gross profit growing 38.1% to 1.15 trillion yen, and gross margin improving by 1.7 percentage points to 47.1%. Selling and administrative expenses decreased by 2.1 percentage points to 18.4%, driving operating profit to surge 52.8% to 697.32 billion yen, with an operating margin of 28.7%. After-tax net profit increased 49.5% to 544.13 billion yen, with EPS soaring from 783.8 yen to 1,182.4 yen.

Although the stock price has already risen, analysts remain optimistic about the outlook. Jefferies maintains a “Buy” rating with a target price of 32,000 yen.

Stock Recommendation 3: Mitsubishi Heavy Industries (7011.JP)

Mitsubishi Heavy Industries, a century-old Japanese industrial icon, traces back to the Mitsubishi Shipyard established in 1884, witnessing Japan’s industrialization since the Meiji Restoration.

Originally starting with shipbuilding and heavy machinery, it has evolved into a comprehensive industrial group covering aerospace, energy equipment, and industrial machinery. As one of the most prominent core companies in the Mitsubishi group, its development trajectory reflects the development of modern heavy industry in Japan and still represents the highest standards of Japanese manufacturing.

Recently, Mitsubishi Heavy Industries announced an optimistic outlook: excluding the impact of U.S. tariffs, benefiting from sustained defense demand, it projects operating profit for FY2025-26 to grow 9.6% to 420 billion yen (about $2.9 billion). This forecast is based on FY2024-25 actuals of 383.2 billion yen (up 35.6%), slightly below market expectations.

On the business front, aerospace and defense are expected to see a 40% increase in operating profit, serving as the main growth engine; energy systems (including turbines and power generation equipment) are also projected to grow profits by 17%.

Eight Wall Street analysts’ average 12-month target price over the past three months is 3,743.76 yen, with a high of 4,100 yen and a low of 3,030 yen. Compared to the current price of 3,185 yen, this indicates a potential upside of 17.54%, reflecting strong market confidence in this century-old enterprise.

Stock Recommendation 4: Nintendo (7974.JP)

Nintendo is a childhood memory shared by gamers worldwide, but its FY2024 performance fell short of expectations—revenue plummeted 30.3% to 1.16 trillion yen, operating profit dropped 46.6% to 282.5 billion yen, and net profit shrank 43.2% to 278.8 billion yen.

The main reasons for revenue decline are twofold: first, the current Switch console models are in the late stage of their lifecycle, causing consumer hesitation; second, the announcement of the next-generation Nintendo Switch 2 further dampened purchase intentions. Geographically, the Americas contributed 44.2% of revenue, Europe and Japan accounted for 24.5% and 23.6%, respectively, with other regions making up 7.7%.

Despite poor performance, why is it still worth recommending? Many market analysts believe that after the slowdown post-pandemic, the electronic gaming industry is re-emerging with investment value. TD Cowen analyst Doug Creutz pointed out that the growth rate of the gaming industry continues to surpass global GDP, driven by expanding player bases, diversified monetization models, subscription services, virtual items, and seasonal content updates, allowing companies to extract more value per player.

Eleven Wall Street analysts’ average 12-month target price over the past three months is 14,035.27 yen, with a high of 20,780 yen and a low of 10,000 yen.

Stock Recommendation 5: Sony Group (6758.JP)

Sony’s latest quarterly report shows that, driven by music and film businesses, net profit for the quarter ending March grew 4.6% year-over-year to 197.7 billion yen, but the company estimates that next fiscal year’s net profit may decline 13%, mainly due to U.S. tariff impacts.

Looking at Sony’s business landscape, the music and film content divisions have become the main profit drivers, benefiting from recent strategic layouts in content ecosystems. Acquisitions of game studio Bungie, anime platform Crunchyroll, and collaboration with Kadokawa Group to develop IP derivatives are already beginning to pay off.

Hardware performance is relatively flat. PS5 sales are revised downward from 18.5 million units to 15 million, indicating a market adjustment. The threat of U.S. tariffs is greater, expected to erode about 100 billion yen in operating profit, forcing the company to reconsider global supply chain arrangements.

Sony executives revealed during the earnings call that measures such as diversifying production bases and adjusting pricing strategies have been initiated. Notably, Sony demonstrates the “resilient management” characteristic unique to Japanese tech companies—while maintaining hardware operations, it accelerates content services. Whether this “soft-hard” strategy can effectively resist geopolitical risks will be a key focus moving forward.

Nine Wall Street analysts’ average 12-month target price over the past three months is 4,389.49 yen, with a high of 4,910 yen and a low of 3,900 yen. Compared to the current price of 3,607 yen, this suggests a potential upside of 21.69%.

Stock Recommendation 6: Mitsubishi Corporation (8058.JP)

Mitsubishi Corporation is one of Japan’s five major trading companies and one of Buffett’s most favored Japanese companies under Berkshire Hathaway.

By the end of June 2025, Berkshire’s National Indemnity filed documents with regulators, announcing increased holdings in the five major trading companies by about 1.0% to 1.7%. After the increase, Berkshire’s stake in these trading companies has reached 8.5% to 9.8%.

Since July 2019, Buffett has invested in Japan’s five major trading companies, attracted by their high capital efficiency, excellent management teams, and shareholder-oriented approach. In his February 2025 shareholder letter, he disclosed that he had obtained Japanese approval to raise his stake above 9.9%, hinting at continued accumulation. These trading companies hold substantial stakes in global energy, resource, and infrastructure projects, with strong capabilities.

Mitsubishi Corporation’s recent FY2025 (ending March 31) results show total revenue of 18.6 trillion yen, down 4.9% from the previous year, but pre-tax profit grew 2.3% to 1.4 trillion yen. Net profit attributable to the parent was 950.7 billion yen, a slight decline of 1.4% from the previous year, demonstrating the resilience of Japan’s integrated trading companies during economic downturns.

However, Mitsubishi’s current stock price is somewhat high; investors may consider patiently waiting for a correction to a reasonable level before entering. With Buffett continuously adding, the long-term investment value is self-evident.

Stock Recommendation 7: Hitachi (6501.JP)

Hitachi is a familiar name for many older generations—known for TVs, VCRs, and Maxell batteries. This 111-year-old Japanese industrial giant has been active recently, investing $9.6 billion to acquire U.S. digital services company GlobalLogic, marking a major transformation into a software services provider. Hitachi CEO Toshiaki Higashihara stated, “This will be a major change for the company.”

Founded in 1910, Hitachi is known for its aggressive M&A strategy among Japanese conglomerates. Although it has exited most consumer electronics markets (retaining small-scale home appliance operations), it has sold off less profitable businesses like power tools and chemicals. Its strategic focus is clear: retain heavy machinery manufacturing such as rail transit equipment and automotive parts, while vigorously pursuing industrial digitalization services to assist manufacturing clients in digital transformation and upgrading.

Despite the impact of U.S. tariffs in April causing Hitachi’s stock to plunge, it quickly rebounded and is now near a 20-year high. UC San Diego professor Ulrike Schaede commented that Hitachi’s frequent asset restructuring creates a “Hitachi shock” for conservative Japanese companies, and its “transformation from an electrical manufacturer to an infrastructure data solutions provider is a model of corporate transition”.

Today’s Hitachi is no longer just an appliance maker. The advantage of investing in Hitachi lies in its clear transformation direction, strong execution, and recent stock performance fully validating market recognition of its transformation.

How Should Taiwanese Investors Allocate in Japanese Stocks?

Having introduced 7 noteworthy Japanese stocks, many may have already started considering investment. So, how can Taiwanese investors invest in the Japanese stock market? Here are three suggestions:

Method 1: Invest in Japanese Stock Indexes

Investing in stock indexes is the most direct and convenient method. Although the gains may not be as spectacular as individual stocks, as long as the Japanese stock market as a whole trends upward, steady profits can be achieved. Trading is essentially about pursuing certainty.

If you prioritize certainty, investing in indexes is the simplest and most effective approach.

Japan’s stock indexes are numerous, with the Nikkei 225 (Nikkei 225 Index) being the most well-known. This index includes 225 of Japan’s top listed companies, covering most well-known Japanese stocks.

In the first half of this year, the Nikkei 225 initially fell to a low of 31,136 amid global tariff fears, then rebounded strongly driven by valuation recovery, global capital flows, and improved fundamentals. From the current situation, although it’s uncertain whether the rebound can continue, Japanese stocks have at least shaken off excessive conservatism and are worth including in asset allocation.

This can be done via Mitrade CFDs, which simply means directly investing in index prices, supporting both long and short trades with one-click execution, offering leverage options from 1-200 times. Suitable for small to medium investors. As shown above, you can invest in Nikkei 225 with as little as USD 50.

Register now, supporting NTD deposits, with a minimum deposit of only USD 50, and get a chance to receive an additional USD 100 bonus.

Method 2: Purchase Japanese Stocks via U.S. Stock Channels

Many well-known Japanese companies have issued ADRs in the U.S. stock market, such as Toyota (TM.US), SoftBank (SFTBY.US), Sumitomo Mitsui (SMFG.US), Nintendo (NTDOY.US), etc. With a U.S. stock account, you can trade these easily (Mitrade supports U.S. stock trading). Their price movements are generally synchronized with their Japanese counterparts.

Method 3: Use Taiwan Brokerage’s Custody Services

Directly buying Japanese stocks is relatively more complicated, but Yuanta Securities and Fubon Securities offer custody services. The process is more complex, with purchase limits and higher fees. For detailed procedures, please consult the customer service of these brokers.

Outlook for Investing in Japanese Stocks

Short-term perspective: Recently, the Japanese stock market’s movement is mainly influenced by trade policies. While tariff reductions may bring rebound opportunities, the global economic slowdown and Japan’s weak export performance suggest the Nikkei may fluctuate between 37,000 and 38,000 points. Many veteran traders warn that current foreign capital inflows are mainly playing valuation arbitrage, and how long this hot money can last remains uncertain.

To capture short-term volatility in Japanese stocks, CFDs are a good choice, with zero commission trading and very low spreads. Register at Mitrade to learn more.

Mid-term perspective (2026): The policy shift of the Bank of Japan 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. However, the key still depends on whether the BOJ’s pace of rate hikes can coordinate with the global economic situation.

For Nikkei to break through 40,000 points again and continue upward, multiple positive factors need to work together, such as corporate governance reforms boosting ROE, emerging industries gaining competitiveness, and substantial progress in U.S.-Japan trade relations. But as of now, these conditions are not yet fully in place.