“American capital is flowing into Japan at the fastest pace since Abenomics was implemented”! Goldman Sachs says: The influx of U.S. capital means Japanese stocks are shifting towards a growth style.

A capital migration led by American investors is playing out in Japan. According to Goldman Sachs’ latest observations, U.S. funds are flowing into the Japanese stock market at an accelerated pace, reaching the highest speed since the era of “Abenomics.” > The growth rate of U.S. capital inflows is the fastest we have seen since Abenomics. Bruce Kirk, chief equity strategist for Goldman Sachs Japan, said in a Bloomberg interview on November 6th that American investors’ active participation in the Japanese market has risen to its highest level since October 2022. Behind this capital inflow is the remarkable return of Japanese shares when denominated in U.S. dollars. Thanks to a 2.5% appreciation of the yen and optimism fueled by Prime Minister Sanae Takaichi’s stimulus policies, the Nikkei 225 Index has risen about 30% this year in U.S. dollar terms, far surpassing the S&P 500’s 14% gain. According to data from the Japan Exchange Group, in just the last two weeks of October, foreign investors made net purchases of 384 billion yen (about $2.5 billion) in Japanese stocks and futures. Goldman Sachs strategists believe this could mark a turning point for Japanese equities, with market drivers potentially shifting from value stocks to growth stocks. The investment preferences of American investors may be a key variable in changing the market style of Japanese stocks. “Greater participation from U.S. funds is significant. They tend to be attracted to themes related to technology and artificial intelligence,” Bruce Kirk emphasized. He believes that as global investors continue to seek diversification, and as their net positions in Japanese stocks remain below the peak reached during Abenomics, there is still room for further foreign capital inflows in the future. ## Tech Stock Valuations Surpass Mag 7; Japanese Equities Overheated However, the market’s enthusiasm is also accompanied by risks. As U.S. capital rapidly pours in, Citigroup issued a recent warning in its report, saying Japanese tech stocks have overheated. A Wall Street article cites Citi analysts who pointed out that the Price/Earnings to Growth (PEG) valuation for Japan’s tech sector has even surpassed that of the U.S. “Magnificent Seven,” but the sector’s profitability has not kept pace, leading to a disconnect between share prices and fundamentals. The bank believes that although the long-term outlook remains optimistic, the market may face a “healthy” correction in the short term, with the Nikkei Index possibly dropping back to 48,000 points. This view also echoes Bruce Kirk’s comment that “the Nikkei Index is now in overbought territory, so a period of consolidation in the market would not be surprising.” Risk Warning and Disclaimer The market has risks; investments should be made with caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial status, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular situation. If you invest based on this, you do so at your own risk.