Japanese Stock Recommendations Guide | Seize Investment Opportunities After the 40,000 Point Level [Including Purchase Strategies]

Why Did the Nikkei 225 Reach a 33-Year High?

As of the end of June 2025, the Nikkei 225 index has risen above 40,487 points, hitting a new high not seen in 33 years. What investment opportunities are hidden behind this rally?

The core logic of this upward trend can be summarized in two aspects. First is valuation repair—in April, global tariff fears triggered a stock market plunge, causing Japan’s P/E ratio to drop to around 12 times, well below international levels. As pessimistic expectations gradually dissipated, institutional investors began to reassess the intrinsic value of Japanese companies, and the P/E ratio slowly rose to about 13 times, becoming the main driver of this rebound.

Second is asset allocation shift. Against the backdrop of a market consensus to “reduce holdings of US stocks,” overseas funds are seeking undervalued markets. Japan’s stock market, being relatively cheap, has become an important target, attracting significant international capital inflows. More importantly, the corporate governance reforms promoted by the Tokyo Stock Exchange are beginning to take effect—more Japanese companies are increasing cash dividends and implementing share buyback plans, improving fundamentals.

Also noteworthy is the recovery of the global tech industry supply chain, which has benefited Japanese semiconductor equipment and precision machinery companies, further boosting market confidence.

It is worth noting that Warren Buffett’s views on Japan’s five major trading companies (Mitsubishi Corporation, Mitsui & Co., Itochu Corporation, Sumitomo Corporation, Marubeni Corporation) are worth considering. Since 2019, he has been buying these stocks, and in June this year, he increased his holdings again, stating at the Berkshire Hathaway annual meeting that he plans to hold long-term, even claiming “won’t sell for 50 years.” This long-term commitment reflects top international investor confidence in the Japanese market.

However, whether the market can continue this momentum depends on the future direction of the Bank of Japan’s monetary policy and changes in global risk appetite.

Recommended Japanese Stocks List

Keyence | Hidden Champion in Industrial Automation

Keyence is a little-known but highly capable company in the industry. Since its founding in 1974, it has focused on developing automation sensors, imaging systems, laser marking equipment, and industrial measurement instruments. Although it does not manufacture products itself, it sells worldwide through a direct sales network in 46 countries and regions.

Its products cover three main areas: industrial automation, precision measurement, and process control. In advanced manufacturing sectors like semiconductors, automotive, and biomedicine, Keyence’s blue logo has become an essential component of smart factories.

In fiscal year 2024, revenue reached 1.059 trillion yen, operating profit was 549.78 billion yen, and net profit was 398.66 billion yen, demonstrating solid financial performance. Wall Street analysts’ 12-month average target price is ¥74,282.41, with a high of ¥80,075. Compared to the current stock price of ¥56,800, upside potential is approximately 30%.

Tokyo Electron | Semiconductor Equipment Leader

Tokyo Electron is a key player in the global semiconductor equipment industry, with a market capitalization of 12.6 trillion yen. It supplies wafer cleaning systems and deposition equipment to giants like Samsung, TSMC, and Intel. As semiconductors become strategically important, demand for related equipment remains strong.

In fiscal year 2024, the company posted impressive results—revenue of 2.43 trillion yen, up 32.8% year-over-year. Overseas sales increased by 36.2%, contributing 2.24 trillion yen (92.2% of total revenue); domestic sales grew modestly by 2.7%. Despite a 28.5% increase in sales costs, the company managed cost control well, 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 earnings per share jumping from ¥783.8 to ¥1,182.4, reflecting the success of its global strategy. Analysts at Jefferies and others maintain a buy rating, with a target price of ¥32,000.

Mitsubishi Heavy Industries | Beneficiary of Defense Industry

As a symbol of Japanese industry, Mitsubishi Heavy Industries traces back to a shipbuilding yard founded in 1884. It has grown into a comprehensive giant covering aerospace, energy equipment, and industrial machinery, representing Japan’s highest manufacturing standards.

The company’s outlook for FY2025-26 is optimistic, expecting operating profit to grow 9.6% to ¥420 billion. The strongest growth drivers are aerospace and defense, with an estimated profit increase of 40%; energy systems will also grow by 17%. These forecasts are based on FY2024-25 actual operating profit of ¥383.2 billion, up 35.6% year-over-year.

Wall Street analysts’ 12-month average target price is ¥3,743.76, with a high of ¥4,100 and a low of ¥3,030. Compared to the current stock price of ¥3,185, potential upside is approximately 17.54%.

Nintendo | Growth Potential in Gaming Industry

When mentioning Nintendo, many think of the gaming consoles that accompanied childhood. However, FY2024 results were disappointing—revenue fell 30.3% to ¥1.16 trillion, operating profit plunged 46.6% to ¥282.5 billion, and net profit shrank 43.2% to ¥278.8 billion.

The revenue decline was mainly due to two factors: the Switch entering the late stage of its lifecycle, with consumers waiting on the sidelines; and the announcement of the Switch 2 further dampening purchase enthusiasm. North America contributed 44.2% of revenue, Europe and Japan accounted for 24.5% and 23.6%, respectively.

Despite short-term sluggishness, why is it still worth watching? Market analysts point out that the growth rate of the gaming industry continues to surpass global GDP. Key drivers include expanding player bases, diversified monetization models (subscriptions, virtual items, seasonal content), allowing companies to earn more from each player.

The 12-month average target price from 11 Wall Street analysts is ¥14,035.27, with a high of ¥20,780—significantly higher than the current stock price, indicating room for growth.

Sony Group | Content Ecosystem Builder

Sony’s latest quarterly net profit increased 4.6% YoY to ¥197.7 billion, but the new fiscal year’s net profit is expected to decline 13%, mainly due to US tariff policies.

The music and film content divisions are profit engines. The company’s acquisitions of game studio Bungie, anime platform Crunchyroll, and collaboration with Kadokawa Group to develop IP derivatives are already showing results.

Hardware business faces challenges—PS5 sales forecast revised downward from 18.5 million units to 15 million units, as the gaming console market adjusts. Tariff impacts are expected to wipe out ¥100 billion of operating profit, prompting the company to replan its global supply chain.

Sony executives have indicated actions to diversify production bases and adjust pricing strategies. Whether its “software-hardware” integrated approach—maintaining hardware sales while accelerating content services—can withstand geopolitical risks remains a key point to watch.

The 12-month average target price from 9 Wall Street analysts is ¥4,389.49, with a high of ¥4,910 and a low of ¥3,900. Compared to the current price of ¥3,607, upside potential is approximately 21.69%.

Mitsubishi Corporation | Buffett’s Top Holding

Mitsubishi Corporation is one of Japan’s five major trading companies and a key investment of Buffett’s Berkshire Hathaway. In June 2025, Berkshire announced an increase of 1.0% to 1.7% in its stake in these trading giants, with total holdings reaching 8.5% to 9.8%.

Buffett has been investing in these companies since July 2019, valuing their capital efficiency, management quality, and shareholder focus. In his February shareholder letter, he revealed that he has received Japanese approval to increase holdings above 9.9%, hinting at continued investment. These trading companies hold large stakes in global energy, resources, and infrastructure projects.

For FY2025 (ending March 31), Mitsubishi’s revenue was ¥18.6 trillion, down 4.9% year-over-year, but pre-tax profit grew 2.3% to ¥1.4 trillion. Net profit attributable to the parent was ¥950.7 billion, a slight decline of 1.4%, demonstrating resilience of Japan’s general trading companies during economic downturns.

However, current stock prices are somewhat high; investors are advised to wait for a correction to reasonable levels before entering. With Buffett’s continued buying support, long-term investment prospects remain attractive.

Hitachi | Pioneer in Digital Transformation

Hitachi is a Japanese industrial giant with a history of 111 years. Older consumers remember its TVs, VCRs, and Maxell batteries. Recently, the company has been very active, acquiring US digital services firm GlobalLogic for $9.6 billion, aiming to shift towards software services.

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

Despite a sharp drop in stock price in April due to tariff policies, it quickly rebounded and is now near a 20-year high. A professor at UC San Diego commented that Hitachi’s frequent asset restructuring challenges conservative Japanese firms, and its shift from an electrical manufacturer to an infrastructure data solutions provider is a model of corporate transformation.

Hitachi’s clear transformation strategy and strong execution have already been recognized by the market, as reflected in its stock performance.