Analysts polled by Reuters expect Japan's benchmark stock index to continue its steep ascent, forecasting a median year-end target of 69,000 for the Nikkei by the end of next year, as optimism around artificial intelligence and dependable earnings underpin market momentum.
The index recorded an all-time intraday high of 65,408.87 on Monday and closed Tuesday at 64,996.09. Despite that jump, the median projection for the end of 2026 sits lower at 62,800, reflecting the recent swift advance in prices. The Nikkei climbed almost 10% from its low on May 20 of 59,292.25, a move that coincided with rising expectations for a near-term end to the Iran war and a sharp rally in technology shares. Over that period, AI-focused investor SoftBank Group surged by more than 60%.
Yunosuke Ikeda, head of macro research at Nomura Securities, described himself as broadly bullish on equities but acknowledged the pace of the rally has outstripped his own projections - he had penciled in 63,000 for December and 65,000 a year later - saying the market's acceleration "is just too sharp to catch up with" as a forecaster.
When polled about the role of AI in driving recent stock market strength, seven of 12 respondents said their views about AI's sustainability were about the same as three months earlier, while five said they had become more optimistic. Ikeda also noted that further AI-driven optimism is not a necessary prerequisite for equities to keep rising.
He added that "Market sentiment about AI sustainability is choppy, which is why the Nikkei has been volatile," but stressed that "earnings growth is stable even without AI, so the uptrend for stocks is likely to continue."
Beyond AI, Japanese shares have benefited from policy and structural support. Respondents pointed to shareholder-centric governance reforms at the Tokyo Stock Exchange and growth-focused policies under Prime Minister Sanae Takaichi as additional tailwinds for the market.
Over the past two years the Nikkei has surged nearly 70%, a performance that has outpaced key benchmarks in the United States, China, and Europe, according to the poll. Among 16 individual forecasts for the index at year-end, only four were below 60,000.
Not all forecasters are unequivocal optimists. Tony Sycamore, an analyst at IG Markets, took a more cautious stance and forecast a slide to 55,000 by the end of December. He argued that "The Nikkei likely topped out this month," leaving the door open for "a 20% pullback before year-end."
Poll participants were divided on the near-term risk of a correction - commonly defined as a drop of 10% or more. Six respondents judged a correction in the next three months to be "likely" or "highly likely," while five described such an outcome as "unlikely."
Hiroshi Watanabe, chief economist at Sony Financial, who projects the Nikkei reaching 70,000 by the end of 2027, fell into the camp that viewed a large correction as unlikely. He cautioned, however, that declines of 5% to 10% "are likely to occur frequently."
Watanabe also commented on geopolitical and macro risks. Although the Iran war has weighed on prices amid concerns about oil-driven inflation and potential higher interest rates, he said "that is unlikely to halt the development of AI." He further suggested that, on the contrary, "accelerating inflation will actually mean an expansion in both the overall economy and corporate earnings as well," supporting equities over the medium term.
Market context and outlook
The poll results illustrate a market where upbeat technology-driven narratives, stable underlying earnings and supportive domestic reforms are combining to lift valuations. Yet the divergence in forecasters' year-end numbers and split views on the likelihood of a near-term correction underscore how quickly sentiment can shift in a fast-moving rally.