The Nikkei 225 has climbed about 30% this year in US dollar terms, prompting a renewed rush of US investment into Japanese stocks, Goldman Sachs says. Bruce Kirk, Goldman Sachs' chief Japan equity strategist, said the pace of US flows into Japan is the fastest the bank has seen since the Abenomics period.
US money returns to Tokyo
Goldman Sachs is reporting a renewed surge of interest from US investors in Japanese equities, driven by strong local returns and growing interest in technology and artificial intelligence themes. Bruce Kirk, Goldman Sachs' chief Japan equity strategist, said the pace of US flows into Japan is the fastest the bank has seen since the Abenomics period. Active participation by US investors is at its highest level since October 2022, Kirk added.
The scale is clear in headline numbers. The Nikkei 225 has climbed about 30% this year in dollar terms, while the S&P 500's gain has been roughly 14% over the same stretch. Kirk and Goldman Sachs fielded an increasing number of meeting requests from US clients over recent weeks as interest shifted toward Japanese growth names.
Why Japan is getting a second look
Several factors are behind the shift. A firmer yen helped returns when measured in US dollars: the yen has strengthened about 2.5% this year, boosting dollar investors' gains. Investors are also responding to policy signals from Tokyo. Prime Minister Sanae Takaichi's pro-stimulus stance has lifted expectations for economic support, and ongoing corporate-governance reforms at the Tokyo Stock Exchange have made Japanese stocks more appealing to overseas asset managers.
Kirk says US flows tend to head for growth sectors, and that pattern is showing up in recent purchases. Where foreign investors had been overweighting value stocks for several years, the recent inflow is tilting demand toward technology and AI-related firms. That shift could mark a turning point for Japan's market structure after four years in which value outperformed growth.
What portfolio managers are doing
Fund managers in the United States aren't just buying index exposure. According to Goldman Sachs' conversations with clients, active requests for meetings and briefings have risen, indicating detailed stock-level interest rather than passive reweighting alone.
Managers are searching for what they see as the next wave of global leaders — companies with AI ties, semiconductors, and software businesses that could benefit if Japan sustains a growth bias.
Goldman Sachs analysts note that global investors' net positions in Japanese equities remain light relative to the peak reached during the Abenomics era. That gap leaves room for more buying if the performance persists. Goldman Sachs expects continued diversification demand to support further inflows, though the size and persistence of future flows will depend on earnings upgrades and macro conditions.
Market implications and risks
The return of significant US capital could change how the Japanese market behaves. Greater foreign presence typically raises liquidity and can amplify moves in growth sectors. The recent tilt away from four years of value dominance would widen the list of companies that lead the market higher. That could benefit investors seeking exposure outside large US megacaps.
But there are risks. Exchange-rate swings can quickly reverse dollar returns. A stronger dollar or weaker yen would reduce US investors' dollar gains even if local prices hold steady. Macroeconomic surprises — in Japan or globally — could slow the rotation into growth names. And greater foreign ownership can also increase sensitivity to international sentiment; sudden shifts in global risk appetite would be felt.
With global investors' net positions still light relative to the Abenomics peak, Goldman Sachs says there is room for further buying if performance continues. If the rotation into growth names is sustained, it could broaden market leadership beyond large US megacaps and reshape where global managers allocate capital.
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"The increase in US flows is now moving at the fastest pace we've seen since Abenomics," said Bruce Kirk, Goldman Sachs' chief Japan equity strategist.
This article was created with AI assistance.
