(Bloomberg) -- The chief executives of two of Japan’s biggest brokerages are expecting further advances in the nation’s shares after two years of strong gains.
Daiwa Securities Group Inc. Chief Executive Officer Akihiko Ogino sees the Nikkei 225 Stock Average potentially hitting as high as 45,000 this year, a 14% jump from the current level. SMBC Nikko Securities Inc. President Shuji Yoshioka is even more optimistic, predicting a climb to as high as 48,500.
“Stock prices are a reflection of economic fundamentals,” Ogino said at a New Year’s gathering of the Japan Securities Dealers Association on Monday. “I expect them to keep rising steadily.”
The Nikkei 225 fell 1.6% to 39,254 on Monday afternoon in Tokyo, the first day of trading for 2025. The benchmark climbed 19% last year, a second straight year of double-digit gains, as improving corporate governance, a weak yen and the emergence of inflation spurred demand for Japanese assets.
Ogino said the nation’s companies are facing pressure to improve how they use capital due to concerns that failing to do so may make some of them a target for acquisitions.
Japanese securities firms including Daiwa, SMBC Nikko and Nomura Holdings Inc. have been benefiting from the stock market rally, which has boosted fees and commissions and fueled a profit recovery. The Bank of Japan’s efforts to raise interest rates are unlikely to dissuade individuals from investing in stocks as inflation erodes the value of their cash savings, according to Ogino.
“Even if interest rates rise a bit, prices are climbing at a faster rate, meaning that a shift away from savings and into investing will continue this year — or even accelerate,” he said.
Risks remain for Japanese stocks though as they approach record highs reached in July. Japan’s two benchmark equity indexes both sank 12% on Aug. 5 after the central bank raised rates for a second time in 17 years, chilling investor sentiment.
There may be potential for similar selloffs if the Bank of Japan raises rates again this year as a majority of economists expect, making it more expensive for companies and individuals to borrow money. Uncertainties about US President-elect Donald Trump’s economic policies and threatened tariffs also may drag down shares if there are negative surprises for investors.
Still, Ogino doesn’t expect any similar stock market turmoil this year. “I don’t think we will frequently see a drop of such magnitude,” he said.
Bank of Japan Governor Kazuo Ueda said on Monday that the central bank will increase its policy rate if economic conditions continue to improve this year, reiterating his existing stance.
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