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Investing.com -- UBS has lowered its equity targets for Japan, citing revised GDP forecasts driven by the impact of new U.S. tariff measures, and flagged a cautious near-term outlook with expectations for recovery beginning in 2026.
The bank cut its year-end 2025 forecast for the TOPIX index to 2,500 from 2,900, and for the Nikkei 225 to 35,000 from 41,500. It also lowered its 2026 targets to 2,700 for TOPIX, from 3,050 and 38,000 for the Nikkei from 43,000, while introducing 2027 targets of 2,900 and 41,000, respectively.
UBS said the revised outlook reflects “the view that Japan’s economic normalisation will be put on hold for 1–2 years,” following the announcement of broad U.S. tariffs that will impact both Japan and global trade.
With uncertainty likely to continue in 2025, we adopt a cautious outlook that assumes roughly flat growth versus current levels, the analysts wrote.
They expect Japan to return to a “moderate upward trajectory” from 2026, assuming no U.S. recession and a resumption of Japan’s wage-led recovery.
The market gained on April 10 after a 90-day postponement of the reciprocal tariffs announced on April 9, but UBS warned that risks remain skewed to the downside.
These include a potential escalation in the U.S.-China trade conflict, a U.S. economic downturn, yen appreciation, and broader financial instability.
Despite the cautious macro view, UBS maintained its preference for domestic demand-related stocks and corporate reform plays, citing scope for bottom-up performance. It highlighted Pan Pacific International Holdings, Toyo Suisan, Sumitomo Realty&Development, and Panasonic (OTC:PCRFY) as recommended picks.
We continue to prefer value names with potential for corporate reforms and domestic demand-related companies, the note said.
