Goldman Sachs stated that, attracted by the significantly higher returns of the Japanese stock market relative to the U.S. market, American investors are increasingly purchasing Japanese stocks focused on technology and artificial intelligence.
According to Zhitong Finance, Goldman Sachs noted that, driven by the exceptionally high returns of Japanese equities compared to U.S. stocks, American investors are showing growing interest in Japanese stocks centered on technology and artificial intelligence. Bruce Kirk, the bank’s chief strategist for Japanese equities, remarked, ‘The pace of inflows from U.S. funds has now reached its fastest level since the era of Abenomics.’ He highlighted that the active participation of U.S. investors in the Japanese stock market is at its highest since October 2022, adding that he frequently receives meeting requests.
The inflow of U.S. capital reflects the robust performance of the Japanese stock market this year when measured in U.S. dollars. The appreciation of the yen by 2.5%, coupled with renewed optimism spurred by Prime Minister Sanae Takagi’s stimulus policies, has bolstered the Japanese stock market. The benchmark Nikkei 225 index has risen approximately 30% this year in dollar terms, far surpassing the 14% gain of the S&P 500 Index.
The increased participation of U.S. capital may mark a turning point for the Japanese stock market, signaling a potential shift in market drivers from value stocks to growth stocks. Supported by measures from the Tokyo Stock Exchange and government initiatives aimed at investor support, value stocks have outperformed growth stocks for four consecutive years since 2021.
Bruce Kirk stated in an interview, ‘The rise in U.S. investor engagement is significant, as they tend to favor themes related to technology and artificial intelligence.’
Kirk believes there is further upside potential for foreign capital inflows. Compared to the peak levels during the Abenomics period, global investors’ net holdings of Japanese equities remain relatively low, leaving room for additional purchases. He noted that the ongoing demand for diversification among global investors could sustain this trend.
Data released by Japan Exchange Group shows that foreign investors net purchased 384 billion yen (approximately $2.5 billion) worth of Japanese stocks through cash and futures markets in the last two weeks of October.
However, given that the Nikkei Index entered overbought territory in late October, Kirk stated that he would not be surprised if the market experienced a consolidation phase.
