J.P. Morgan Japan Equity Strategy: Apr–Jun Earnings Outlook — Mini Rotation from AI-Driven Market, Earnings Increase in Importance
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Key Views
The BOJ June Tankan survey showed large-manufacturer sentiment at an eight-year high, supported by falling crude oil prices and global AI-semiconductor demand. However, margin indicators deteriorated, suggesting some sectors may see sales growth without proportional profit improvement. Manufacturing segments benefiting from AI, semiconductor, and data-center investment—such as production machinery, electrical machinery, and non-ferrous metals—reported improved sentiment. Non-manufacturing strengths centered on accommodation, restaurants, and retail.
Sectors poised to benefit from lower oil prices—electric power and gas, transportation and logistics, materials and chemicals, and construction—are expected to deliver positive April–June results, with potential upward earnings revisions. The food sector may lift guidance as cost pass-through progresses. Automotive, defense, and banking could raise guidance at the October–November interim results.
Outlook
AI server, semiconductor production equipment, and electronic component earnings remain robust, but elevated valuations heighten vulnerability to any slowdown. Conversely, IT services, software, and AI-application companies lag on valuation and could attract capital rotating from AI semiconductors if earnings confirm strength.
Recommended Securities
Analysts cite Isuzu, Suzuki, Honda, Toyota, Hitachi (6501), Mitsubishi Electric (6503), Sony Group (6758), Nittobo (3110, Overweight), Capcom, Konami Group, and Recruit Holdings favorably.
Key exhibits
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