I’ve been closely observing the trend in the Japanese stock market recently—rising from over 30,000 to over 60,000. This rally is definitely worth a careful study. Why have Japanese stocks surged so aggressively this year? Put simply, it’s the combined effect of three forces: strong reforms by the Tokyo Stock Exchange, a market reappraisal of the value of Japanese companies, and structural advantages driven by the global tech industry’s recovery.

In the past, Japanese companies had an old habit: they had plenty of cash and steady profits, but they weren’t willing to reward shareholders. The market has long been discounting Japanese stocks, but that situation is changing. The Tokyo Stock Exchange has started to require companies to improve capital efficiency, forcing many firms to raise dividends, increase share buybacks, and improve ROE. Just in May, some companies announced plans to spend ¥7.72 billion on share repurchases. Simply put, Japanese companies are being pressured by the market to learn how to “make shareholders money.”

Warren Buffett has been buying shares of five major Japanese trading companies since 2019, and has even increased his holdings recently. At the shareholders’ meeting, he explicitly said he “won’t sell these stocks for 50 years,” which is enough to show his confidence in the long-term value of Japanese stocks.

If you’re looking for some Japanese stocks worth paying attention to, I think you can consider a few directions. Keyence is an invisible champion in industrial automation— from sensors to vision systems—its products are sold in 46 countries worldwide. If AI really is going to reshape manufacturing, factory automation will inevitably accelerate, and this company’s moat will be hard to shake in the short term. Tokyo Electron specializes in supplying wafer cleaning and coating equipment to giants like Samsung and TSMC; demand for AI chips directly drives wafer-fab expansion, and expansion necessarily requires equipment.

Mitsubishi Heavy Industries is something of a living fossil of Japanese industry—starting with shipbuilding and now spanning strategic fields such as aerospace, space, energy, and industrial machinery. Mitsubishi Corporation is one of the five trading companies Buffett has heavily favored, but its stock price is currently a bit high; it’s recommended to wait for a pullback before entering. Toyota has been steady in its electrification transition. Solid-state battery technology is expected to be commercialized in 2027–2028, with a driving range of up to 1,200 kilometers—this is the direction for next-generation battery technology. Sony is no longer just a gaming company; it has a high market share in mobile phone camera sensor technology. The proliferation of AI devices will actually increase demand for high-end sensors. In recent years, Hitachi has been pushing an aggressive transformation, spending $9.6 billion to acquire a U.S. digital services company, shifting from consumer electronics to industrial digitalization services, with very strong execution.

If you want to invest in Japanese stocks, there are several options. The most straightforward is to invest in stock indices like the Nikkei 225— as long as the Japanese stock market overall rises, you have more certainty of returns. Alternatively, you can buy Japanese companies’ depositary receipts (DRs) through U.S. stock channels. Companies like Toyota, SoftBank, Sumitomo Mitsui, and Nintendo are listed in the U.S., making trading very convenient. Taiwanese brokers can also handle cross-trading, but the process is more complicated and the fees aren’t cheap.

The Nikkei index standing above 65,000 points isn’t just short-term sentiment swings; it’s the result of multiple forces stacking up—reforms, buybacks, AI supply chains, and a weak Japanese yen. Global capital is re-pricing Japanese companies, and this trend could continue for a number of years, but the volatility along the way won’t be small. Whether it can sustain in the future depends on whether corporate earnings can take the baton. As long as overseas revenue remains strong, the yen stays weak, and AI capital expenditures keep expanding, the earnings-driven logic will hold. However, short-term volatility is inevitable—so chasing highs requires caution, and building positions in batches is safer than making a single, heavy allocation.