Goldman Sachs: Japan Weekly Kickstart - TOPIX Target Raised to 4,300 Post-LDP Win
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Goldman Sachs raised its TOPIX 12-month target from 3,900 to 4,300 following the LDP's decisive victory in the February 8 lower house election, where it secured a 68% absolute majority, its highest ever. This historic win suggests an extended period of political stability lasting up to four years.
Historically, similar LDP landslide victories in 2005 and 2012 triggered substantial equity market rallies and forward P/E expansion, averaging roughly 3 points within six months. Consequently, Goldman upgraded its TOPIX target P/E multiples to 18.5x for 3 months, 18.9x for 6 months, and 17.6x for 12 months.
The 3Q FY25 earnings season is also supportive. As of February 12, the aggregate surprise rate is +5%, with 52% positive surprises and 34% negative. Goldman raised its FY25 EPS growth forecast to 7% (from 5%), and expects 12% and 10% growth for FY26 and FY27, respectively.
Corporate governance reform is expected to regain focus ahead of the June 2026 AGM season. Goldman published a corporate governance playbook identifying 18 stocks that screen positively across multiple governance reform criteria.
Supporting factors include political stability, improving earnings, governance reforms, and calm bond and FX markets. Foreign investors net bought JPY 248 billion in the week ending February 6.
However, Goldman cautions that Japanese equities have not experienced a 5% drawdown since April 2025, an unusual streak. Potential catalysts over the next 1-2 quarters include a March US-Japan summit, the FY25 full-year earnings season, and the June AGM season.