1. 2024 Highlights: Record Gains Amid Policy Shifts and Corporate Reforms

Performance Overview:The Nikkei 225 rose 19.2% in 2024, driven by:

Policy Normalization: The Bank of Japan began normalizing monetary policy, signaling confidence in economic recovery.
Private Consumption: Years of stagnation began to ease, boosting domestic demand.
Corporate Reforms: Increased shareholder returns and robust earnings attracted foreign capital.

Challenges:

Uncertainty over Japanese interest rates and a muddled political outlook.
Concerns over U.S. trade policy under President-elect Donald Trump.

2. 2025 Outlook: Continued Constructive Momentum
Bernstein analysts maintain a positive view on Japanese equities, citing the ongoing multi-year bull cycle driven by the “4Rs”:

Reform: Corporate governance improvements.
Restructuring: Better operational efficiency and cost management.
Reflation: Stimulus efforts supporting economic activity.
Reshoring: Increased domestic production amid global trade tensions.

3. Sector Preferences
Bernstein highlights sectors with domestic exposure as key opportunities:

Bullish Sectors:

Healthcare equipment and services.
Consumer durables and apparel.
Media, energy, and household goods.
Financials and retail.

Headwinds Expected:

Food and staples retailing.
Transportation.
Telecommunications and utilities.

4. Global Positioning and Trade Dynamics

Japan’s equities remain underweighted by global investors, presenting opportunities for increased inflows.
Domestically-oriented stocks are expected to outperform, serving as a safe exposure to Asia amid U.S.-China trade tensions under the Trump administration.

5. Long-Term Opportunities in Exporters
While domestic sectors are the current focus, Bernstein notes that Japan’s global dominance in industries like electronics and automobiles makes exporters attractive for long-term growth.
For sector-specific financial insights, leverage the Sector Historical Overview API or explore market valuation trends with the Sector P/E Ratio API.