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Best Japan stocks: Zooming in on the string-of-islands

By Prachi Sinha

Edited by Vanessa Kintu

10:12, 21 January 2022

Rising against the backdrop of the Japan flag and stock price fluctuations. Rising stock prices of companies.
Best Japan stocks: Zooming in on the string-of-islands – Photo: Shutterstock

As Covid-19 and its variants continue to cause global disruption, Japan is looking to impose a fresh set of restrictions on Tokyo and several other regions.

Amid rapidly increasing Omicron cases, the government is looking to introduce ‘quasi-emergency’ measures from 20 January until 13 February to contain mobility and economic activities.

In an official statement, Japanese Prime Minister Fumio Kishida said:

“We are battling against an unknown virus, and I hope that we can overcome this situation with sufficient preparation and without excessive fear.”

As the country navigates the Omicron scare, join us as we undertake a Japan stock market analysis and find out which Japan stocks to watch out for.

The pandemic effect: impact on Japanese economy

With the country reporting its first case of Covid-19 on 16 January 2020, the government was quick to respond, launching an effective test-track-and-trace strategy. However, things took a turn for the worse in late 2020 and 2021 as the country grappled with the pandemic.

Compared to the other G-7 countries, Japan was late to initiate a large-scale vaccination drive. However, vaccinations picked up towards the end of the year and by November 2021 it had surpassed all of the G-7 nations in terms of the number of fully vaccinated people.

 G-7 nations vaccination comparison

Japan reported a drop of almost a million in its employed workforce in April 2020. The majority of job cuts were felt in the food and beverage, and accommodation industries - sectors hardest hit by lockdown measures. The unemployment rate peaked at 3.0% in May 2021. By November 2021, this had fallen to 2.8%.

Japan unemployment rate (November 2020 to November 2021)

The Consumer Price Index (CPI) measures the average change in prices over a period of time for a fixed market basket of goods and services.

According to the Statistics Bureau of Japan, the country’s CPI in November 2021 was 100.1 - up 0.6% on the previous year, before seasonal adjustment.

On a seasonally adjusted basis, the increase was 0.3% from October 2021.

Of its 10 Major Index Sectors, the highest annual increase of 9.2% was recorded in the price of fuel, light and water. 

Tracking the Tokyo Stock Exchange

Established in 1878, the Tokyo Stock Exchange (TYO), or Tosho, is the largest stock exchange in Japan. It’s owned and run by the Japan Exchange Group, which is ranked fifth globally in terms of the biggest stock exchange operators, according to market capitalisation based on data from October 2021.

The Tokyo Stock Price Index, or Topix, and the Nikkei 225 are the major indices of the Tokyo Stock Exchange. Topix is considered a benchmark index for investing in Japan’s stock market and tracks the top Japanese stocks.

A capitalisation-weighted index, it closed at 1938.53 on 20 January 2022. Compared to its close of 2030.22 as of 4 January 2022, the index has lost 4.51%.

Tracking 5 Blue Chip Japan Stocks

According to data by CompaniesMarketCap.com, the following are some of the biggest companies on the Japan stock list by market capitalisation. Below the table, we zoom in on some of the best Japan stocks to invest in and others which haven’t performed as well.

Top 5 Tokyo companies by market capitalisation

Toyota Motor

Incorporated in 1937, Toyota is the world’s largest automaker. The company has its headquarters in Toyota City, Aichi.

In addition to automobiles, Toyota (TM) has diversified into finance, housing, marine, agri-bio, robotics and frontier research.

On 4 November 2021, the company published its FY2022 H1 results, reporting sales revenue of JPY15.4m. Compared to FY 2021 H1 revenues of JPY11.3m, the top-line grew by 36.2%.

The interim ordinary dividend has risen by JPY15 since last year. It currently stands at JPY120 per common share. It’s one of the best Japan dividend stocks, with an outlook to have a consolidated pay-out ratio of 30%.

At the time of writing (20 January 2022), the stock had last closed at $202.42 on the New York Stock Exchange (NYSE) – a 8.65% increase since its start of the year close price of $186.29, as of 3 January 2022.

Toyota Motor stock price chart

Algorithm forecasting service Wallet Investor says the Toyota stock price could close at $301.41 by January 2027.

Data compiled by Market Beat shows that three analysts have given the stock a ‘buy’ rating. The average price target is $178 – a 12.06% downside of the last close price of $202.42. On 30 November 2021, UBS Group upgraded its rating from ‘neutral’ to ‘buy’ and set a price target of $178.

Sony

Sony (SONY) is one of the most comprehensive global media companies with product offerings in electronics, music publishing, film studios and video games. It started out in 1946, making it the oldest Japanese company to be listed on the NYSE.

On 28 October 2021, the company released its Q2 FY 2021 financial results, reporting sales of JPY2.36mn. Compared to Q1 FY 2020 sales of JPY2.10m, that’s an increase of 12.38%.

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Of all reportable segments, Game & Network Services contributed the highest revenues, making up almost 28% of the company’s overall sales.

At the time of writing (20 January), the stock had last closed at $110.04 – a 12.85% decrease, since its start of the year close price of $126.27, as of 3 January 2022.

Sony stock price chart

Algorithm forecasting sitee Wallet Investor says Sony stock could close at $272.07 by January 2027.

Data compiled by Tip Ranks shows that three analysts have given the stock a ‘buy’ rating. The average price target is $150 – 36.31% up on the last close price of $110.04. On 1 December 2021, Atul Goyal, of Jefferies, reiterated a ‘buy’ rating.

Nippon Telegraph & Telephone

Commonly known as NTT, this Japanese telecommunications giant is headquartered in Tokyo. By revenue metrics, NTT is the fifth largest telecommunication company globally, as of August 2021.

NTT’s business spans mobile communications, data & international communications, real estate, system development and finance.

On 18 January 2022, the company announced the launch of SDPF Edge, an edge-computing service with integrated operations. Available at a flat monthly fee, this service is primarily targeted at the manufacturing industry for making cost-effective decisions.

At the time of writing (20 January), the stock had last closed at JPY3,250 ($28.36) – a 2.75% increase since its start of the year close price of $27.60, as of 3 January 2022.

Nippon Telegraph & Telephone stock price chart

Algorithm forecasting service Wallet Investor says the NTT stock price could close at $23.91 by January 2027.

Based on data compiled by Market Watch, 13 analysts gave the stock a ‘buy’ rating, three rated it ‘overweight’ and four recommended ‘hold’.

Data compiled by CNN Money shows that 18 analysts have given an average price target of $32.80 – 15.65% on the upside of the last close price of $28.36.

SoftBank

With a mission to make a better society, SoftBank was founded in 1981. Headquartered in Tokyo, this conglomerate holding company operates in finance, information technology, broadband and e-commerce.

On 4 November 2021, the company released its consolidated results for Q2 FY2021, publishing revenues of JPY2.72bn, a 12% increase on a year-on-year basis.

On 10 November 2021, in its press release, the company announced an agreement with NVIDIA to open a research facility, the ‘AI-on-5G Lab’. This facility is set to accelerate the commercialisation of fully virtualised private 5G, which could help SoftBank develop end-to-end solutions.

At the time of writing (20 January), the stock had last closed at $46.70, a 3.49% decrease, since its start of the year close price of $48.39, as of 3 January 2022.

SoftBank stock price chart

Algorithm forecasting site Wallet Investor says SoftBank could close at $32.26 by January 2027.

Based on data compiled by Market Watch, 13 analysts have given the stock a ‘buy’ rating and three have it at ‘overweight’.

Nintendo

One of the most popular video game companies globally, Nintendo was founded in 1889. Headquartered in Kyoto, this company has developed some of the most successful gaming consoles, including Game Boy.

On 4 November 2021, Nintendo published its H1 FY2022 quarterly financial results for the period ended 30 September 2021. The company reported a fall in both its top-line and bottom-line numbers. This compared to a strong H1 FY 2021 when demand for its products soared during global lockdowns.

Nintendo stock price chart

Compared to H1 FY 2021 net sales of JPY7.69bn, H1 FY 2022 sales fell by 18.88% to JPY6.24bn. On the net profits front, a 19.38% drop was recorded from JPY2.13bn (H1 FY 2021) to JPY1.71bn (H1 FY 2022).

Based on data compiled by Market Watch, 11 analysts gave the stock a ‘buy’ rating, four analysts recommended a ‘hold’, one tagged it as ‘underweight’ and two suggested a ‘sell’.

Algorithm forecasting site Wallet Investor says Nintendo’s stock price could increase to $774.27 by January 2027.

When considering whether to invest in the company’s stock, you should always do your own research, considering the outlook and relevant market conditions. A number of factors dictate whether stock prices rise or fall, including the company’s fundamentals and broader macro-economic factors. There are no guarantees. Markets are volatile. You should conduct your own analysis, taking in such things as the environment in which it trades and your risk tolerance. Past performance is no guarantee for future success. And never invest money that you cannot afford to lose.

FAQs

Is Japan stock a good investment?

Whether Japanese stocks are a suitable investment depends on your own investment objectives. You should conduct your own research and then make a decision regarding which are the best Japan shares to invest in. It’s important to reach your own conclusion on a company’s prospects of stock trading in Japan and the likelihood of achieving analysts’ targets.

What is TOPIX Core 30?

The Topix Core 30 index tracks 30 of the biggest and most liquid Japanese stocks, from Topix Index which covers over 1,500 to 2,000 Japanese companies.

Markets in this article

7974
Nintendo Co., Ltd.
8566.2 USD
-43.5 -0.510%
9432
Nippon Telegraph and Telephone Corporation
161.93 USD
0.1 +0.060%
9984
SoftBank Group Corp.
10509.4 USD
-80.8 -0.770%
SNE
Sony
93.08 USD
-0.01 -0.010%
7203
Toyota Motor Corporation
3105.1 USD
-39.5 -1.260%

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