Goldman Sachs: Yen's Value at Favorable Levels for Purchasing Japanese Stocks

Goldman Sachs' chief Japan equity strategist Bruce Kirk stated that the current level of the yen against the dollar is favorable for overseas investors to purchase Japanese stocks. Kirk noted that the currency, trading around 157.13 against the dollar in Tokyo on Tuesday, presents only a limited risk of weakening beyond 160, especially considering the possibility of some form of intervention by Japanese authorities. This situation offers a sweet spot for overseas funds to make stock purchases relatively cheaply now, with the likelihood of a decline in their dollar values later due to yen depreciation decreasing.

According to Kirk, this scenario also provides the opportunity for currency gains in the event that Japan's currency strengthens. While Japanese stocks have recovered most of their losses since the August downturn, many overseas funds have been on the sidelines. The return of these funds could provide the much-needed support for the Topix to reach an all-time high in 2025.

Goldman’s 12-month target for the Topix index is 3,100. This figure is 2,900 for UBS Securities Japan and 3,000 for JPMorgan Chase & Co. In an interview, Kirk remarked, "It was quite natural for foreign investors to step back from Japan."