Japan's Popular Stock Investment Guide | How to Select Japanese Stocks and Seize Investment Opportunities

Why Is Now a Good Time to Allocate in Japanese Stocks?

Since the start of 2025, the Japanese stock market has experienced a rollercoaster-like trajectory. After a sharp decline in April due to the Trump tariff wave, the Nikkei 225 index rebounded strongly, especially in the second quarter, with the upward momentum becoming more evident. As of June 30, the Nikkei 225 has broken through 40,000 points, reaching 40,487 points, hitting a recent high.

The logic behind this rally warrants in-depth exploration. First is the market’s renewed recognition of Japanese corporate value. When panic spread in April, the P/E ratio of Japanese stocks briefly fell to 12x, making it a “value crater” among major global markets. As investors gradually realized that previous pessimistic expectations were overdone, the P/E ratio steadily recovered to 13x, with valuation repair becoming the core driver of the rebound.

Second, international capital is undergoing strategic adjustments. The call to “reduce holdings of U.S. stocks” is growing louder, and overseas institutional investors are reallocating assets, with the relatively cheap Japanese stock market becoming an important target. More importantly, the corporate governance reforms promoted by the Tokyo Stock Exchange are beginning to show results, with more listed companies willing to increase dividends and implement share buybacks, indicating that fundamentals are genuinely improving rather than just technical rebounds.

Additionally, the global tech industry chain’s recovery has driven the performance of Japanese semiconductor and precision equipment stocks, further strengthening market confidence in a bullish transition. However, whether this rally can continue depends critically on the Bank of Japan’s monetary policy direction and whether global investors’ risk appetite will shift again.

Notably, Warren Buffett’s recent moves have boosted market confidence. Since 2019, he has invested in Japan’s five major trading companies (Mitsubishi, Mitsui, Itochu, Sumitomo, Marubeni), and in June this year, he increased holdings in these companies. At the Berkshire Hathaway annual meeting, Buffett personally stated that he would “not sell” his holdings in these five trading companies for 50 years, demonstrating his strong confidence.

Top 7 Popular Japanese Stocks

1. Keyence (6861.JP) - The Hidden Champion in Industrial Automation

Many retail investors may not be familiar with the name Keyence, but it is a true “hidden champion” in industrial automation. Founded in 1974 by Takeshi Takizaki in Osaka, Keyence has always adhered to a “design-oriented” philosophy, focusing on developing high-value-added automation sensors, vision systems, laser marking equipment, and industrial measurement instruments. Although it does not engage in manufacturing, its products are sold in 46 countries and regions through a global direct sales network.

Keyence’s products cover three core areas: industrial automation (sensors, barcode readers), precision measurement (digital microscopes, measurement devices), and process control (laser processing equipment). In high-end manufacturing sectors such as semiconductors, automotive manufacturing, and biopharmaceuticals, Keyence’s blue logo has become a standard for “smart factories.”

In fiscal year 2024, its financial performance was outstanding: revenue reached 1.059 trillion yen, operating profit was 549.78 billion yen, and net profit hit 398.66 billion yen. Wall Street analysts’ 12-month average target price is 74,282.41 yen, with a high estimate of 80,075.16 yen. Compared to the current stock price of 56,800 yen, Keyence has approximately 30% upside potential.

2. Tokyo Electron (8035.JP) - Semiconductor Equipment Leader

Tokyo Electron is an indispensable equipment supplier in the global semiconductor supply chain, with a market capitalization of 12.6 trillion yen. It supplies critical process equipment such as wafer cleaning systems and deposition equipment to industry giants like Samsung, TSMC, and Intel. As semiconductors become increasingly strategic in electronics and military applications, demand for related equipment continues to rise.

In fiscal year 2024, consolidated revenue reached 2.43 trillion yen, up 32.8% year-over-year. Overseas sales grew especially rapidly, reaching 2.24 trillion yen, an increase of 36.2%, accounting for 92.2% of total revenue. Despite a 28.5% increase in cost of sales, Tokyo Electron’s excellent cost control led to a 38.1% increase in gross profit to 1.15 trillion yen, with gross margin rising 1.7 percentage points to 47.1%. Even more notable is the surge in operating profit, up 52.8% to 697.32 billion yen, with net profit after tax growing 49.5% to 544.13 billion yen, and EPS soaring from 783.8 yen to 1,182.4 yen.

Analysts from Jefferies and others maintain a “Buy” rating, with a target price set at 32,000 yen, indicating significant upside potential.

3. Mitsubishi Heavy Industries (7011.JP) - Defense and Heavy Industries Leader

Mitsubishi Heavy Industries (MHI) is a “fossil” of Japanese industry, with origins dating back to the Mitsubishi Shipyard established in 1884. From the Meiji Restoration to today, this century-old enterprise has witnessed Japan’s industrialization process and has evolved into a comprehensive industrial giant covering aerospace, energy equipment, and industrial machinery.

The latest outlook is optimistic. Without considering U.S. tariff impacts, driven by strong defense demand, MHI projects operating profit for FY2025-26 to grow 9.6% to 420 billion yen. This is based on the excellent FY2024-25 actual operating profit of 383.2 billion yen (up 35.6%). Among these, aerospace and defense segment profits are expected to increase by 40%, and energy systems by 17%, becoming key growth drivers.

Wall Street analysts’ 12-month average target price is 3,743.76 yen, with a high of 4,100 yen. Compared to the current price of 3,185 yen, upside potential is 17.54%.

4. Nintendo (7974.JP) - Turning Point in the Gaming Industry

Nintendo, a giant in gaming that accompanies players worldwide, posted disappointing results for FY2024. Revenue fell sharply by 30.3% to 1.16 trillion yen, operating profit plummeted 46.6% to 282.5 billion yen, and net profit shrank 43.2% to 278.8 billion yen.

The main reasons for revenue decline: first, the current Switch models are nearing the end of their lifecycle, with consumer caution prevalent; second, the teaser for the next-generation Nintendo Switch 2 further dampened purchase enthusiasm. Regionally, the Americas contributed 44.2% of revenue, Europe 24.5%, and Japan 23.6%.

But why is it still worth watching? Market analysts believe the electronic gaming industry is re-emerging as an investment opportunity. TD Cowen analyst Doug Creutz points out that the gaming industry’s growth rate continues to surpass global GDP, driven by expanding player bases and diversified monetization models—subscription services, virtual items, seasonal content updates—allowing companies to earn more per player.

The 12-month average target price from 11 Wall Street analysts is 14,035.27 yen, with a high of 20,780 yen, reflecting optimistic market expectations for Nintendo’s future.

5. Sony Group (6758.JP) - Beneficiary of Content Ecosystem

Sony’s latest quarterly financials show that, driven by music and film businesses, net profit for the March quarter increased 4.6% year-over-year to 197.7 billion yen. However, the company forecasts that next fiscal year’s net profit may decline 13%, mainly due to U.S. tariff policies.

Performance varies across segments. The music and film content divisions are the main profit drivers, benefiting from Sony’s recent content ecosystem investments—acquiring game studio Bungie, anime platform Crunchyroll, and collaborating with Kadokawa Group to develop IP derivatives. These investments are now paying off.

In contrast, hardware performance is lackluster. PS5 sales are revised downward from 18.5 million units to 15 million units, indicating a market adjustment. A bigger threat is U.S. tariffs, expected to cut about 100 billion yen from operating profit, forcing Sony to reconsider its global supply chain layout.

Sony executives have responded by diversifying production bases and adjusting pricing strategies. Notably, Sony demonstrates Japan’s tech companies’ unique “agile management” ability, maintaining hardware while accelerating content service transformation. Whether this “soft-hard” strategy can successfully counter geopolitical risks remains a key focus.

The 12-month average target price from 9 Wall Street analysts is 4,389.49 yen, with a high of 4,910 yen. Compared to the current price of 3,607 yen, upside potential is 21.69%.

6. Mitsubishi Corporation (8058.JP) - Buffett’s Long-term Holding

Mitsubishi Corporation is one of Japan’s five major trading companies and a favorite of Buffett’s Berkshire Hathaway. As of late June 2025, Berkshire announced increased holdings in all five trading companies by 1.0% to 1.7%, with total holdings reaching 8.5% to 9.8%.

Buffett has been investing in these trading companies since July 2019, valuing their capital efficiency, excellent management, and shareholder focus. In the February 2025 shareholder letter, Buffett revealed that Japanese authorities have agreed to let his holdings exceed 9.9%, hinting at continued increased investment. These trading companies hold significant stakes in global energy, resources, and infrastructure projects.

Mitsubishi’s FY2025 results (ending March 31) show total revenue of 18.6 trillion yen, down 4.9% year-over-year, but pre-tax profit grew 2.3% to 1.4 trillion yen. Net profit attributable to shareholders was 950.7 billion yen, a slight decline of 1.4%, demonstrating resilience amid economic headwinds.

Currently, Mitsubishi’s stock price is somewhat high; it’s advisable to wait for a correction to a more reasonable level before investing long-term, but the investment case remains clear.

7. Hitachi (6501.JP) - From Manufacturer to Service Provider

Hitachi has a history of 111 years; older investors may remember its TVs, VCRs, and Maxell batteries. Recently, this Japanese industrial giant has been active, investing $9.6 billion to acquire U.S. digital services firm GlobalLogic, aiming to transform into a software service provider. CEO Toshiaki Higashihara states, “This will be a major transformation for the entire company.”

Founded in 1910, Hitachi is known for aggressive M&A among Japanese conglomerates. Although it has exited most consumer electronics markets, it has recently sold off stagnant businesses like power tools and chemicals. Its current strategy is clear: retain heavy machinery businesses such as rail transit and auto parts, and focus on industrial digitalization services to help manufacturing clients upgrade digitally.

The Trump tariff policies in April caused Hitachi’s stock to plunge but quickly rebounded, and the stock price remains near a 20-year high. UC San Diego professor Ulrike Schaede praises Hitachi’s transformation “from an electrical manufacturer to an infrastructure data solutions provider,” exemplifying corporate transformation.

Hitachi’s attractiveness lies in its clear transformation strategy and strong execution, with the market fully recognizing its direction.

How Can Taiwanese Investors Enter Japanese Hot Stocks?

Once you’ve identified stocks to invest in, the key is choosing the right investment channels. The following three methods each have advantages and disadvantages:

Method 1: Direct Investment in Indexes for Certainty Returns

Rather than picking individual stocks, investing in Japanese stock indexes is simpler and more stable. Although the gains may not be as spectacular as individual stocks, as long as the Japanese market as a whole rises, profits are assured. The Nikkei 225 index covers 225 top listed Japanese companies, essentially including all well-known Japanese firms.

In the first half of the year, the Nikkei 225 initially fell to 31,136 points amid global tariff fears—an over a year low—and then rebounded strongly under valuation repair, capital flows, and fundamental improvement logic. While it’s uncertain if this rebound will sustain, Japanese stocks have shaken off excessive caution and can serve as an asset allocation direction.

Method 2: Buying Japanese Companies via U.S. Stock Channels

Many well-known Japanese companies issue ADRs in the U.S., such as Toyota ™, SoftBank (SFTBY), Sumitomo Mitsui (SMFG), and Nintendo (NTDOY). Opening a U.S. brokerage account allows easy investment, and these stocks tend to move in tandem with their Japanese counterparts.

( Method 3: Using Taiwanese Brokers for Custody and Trading

Directly purchasing Japanese stocks is more complicated, but brokers like Yuanta Securities and Fubon Securities offer custody services. The process is more complex, with purchase limits and higher fees. Details can be checked with each broker’s customer service.

Long-term Outlook and Short-term Trading Tips for Japanese Stocks

Short-term view: Recent Japanese stock movements mainly depend on trade policies. Even if tariff cuts trigger a rebound, global economic slowdown and weak exports may keep the Nikkei oscillating around 37,000–38,000 points. Veteran market insiders warn that current foreign capital inflows are mainly valuation arbitrage, and the duration of this hot money remains unpredictable.

Mid-term key: Extending to 2026, the Bank of Japan’s monetary policy shift will be crucial. If the BOJ begins to raise interest rates, financial stocks could revalue, and yen normalization could improve corporate profitability. The main question is whether the BOJ’s rate hikes can align with global economic conditions.

Long-term breakout: For the Nikkei to break through 40,000 points and continue rising, multiple positive factors need to align—ongoing corporate governance reforms boosting ROE, emerging industry competitiveness, and substantive improvements in Japan-U.S. trade relations. However, these conditions are not yet fully in place, and investors should be patient.