Japan and its investors were navigating uncharted territory in 2025, according to the country’s top research providers.

This was driven by forces both international and domestic including U.S. tariffs imposed by Donald Trump; artificial intelligence and excess liquidity in the U.S. markets; and a pivot toward aggressive domestic fiscal policy after the election of Sanae Takaichi as Japan’s prime minister in October.

After a series of challenges in the beginning of the year, global investor sentiment was buoyed by the election of Japan’s first female prime minister—dubbed the “Takaichi trade”—and sent stocks soaring to record highs that fall. “In 2025, the Japanese market faced a range of challenges, including the Trump tariffs,” confirmed Senior Managing Director Masataka Kunugimoto of Nomura. “However, following progress in trade negotiations, a steady shift toward an inflationary economy, and the formation of the Takaichi cabinet, market dynamics became more vibrant.

“In particular, the Japanese equity market—although the Nikkei 225 fell as much as 22.0% year-to-date at one point in April—was driven by the global AI boom and went on to reach record highs. It was a year in which Japanese companies’ valuation discounts, profitability, and growth prospects were reassessed favorably,” Kunugimoto continued.

The election also delivered benefits for Morgan Stanley, according to Kunihiko Shiohara, Director of Japan Research, “The Lower House election outcome increases the probability of our bull case TOPIX outlook. Greater political stability under a potentially long running Takaichi administration should reduce policy uncertainty, support domestic capex, and anchor expectations for proactive—but not excessive—fiscal policy. Together with a still patient Bank of Japan, this backdrop is constructive for equities, particularly financials, defense related names, and real asset linked sectors, as policy predictability improves and risk premia compress.”

The market has been constantly rotating through themes such as the AI revolution, governance reforms, and domestic and international politics, according to one head of research.

This is reflected in the results of Extel’s 33rd annual Japan Research Team Survey. While the names on the leaderboard are familiar, a reshuffling has produced a new winner in this year’s survey: Nomura.

Based on the opinions of 1,045 directors of research and heads of investment firms with major securities holdings in Japan representing 400 firms, the Japanese firm skyrocketed from last year’s fifth place to take No. 1, adding five team positions for a total of 28.

Daiwa Securities Group added one team position and increased its standing to second place. Mizuho Securities was recognized in third along with Morgan Stanley, which was once again the highest ranked international firm. SMBC Nikko Securities rounded out the top five.

Nomura’s Masataka Kunugimoto credited the firm’s commitment to research and the Japanese market—the bank is celebrating its 100th anniversary—as differentiators in an increasingly competitive environment for talent.

“Competition in securing talent is heating up even more,” Kunugimoto said. “As many investors are looking into Japan, more buy-side firms, or platform hedge funds in particular, are hiring investment professionals. Brokers, both foreign and domestic, are also beefing up their research offering to cope with the increasing buy-side appetite for Japan. Nomura, from its inception 100 years ago, has always put strong priority in research and has served investors for a long period of time regardless of market conditions. We steadily invest in best-in-class researchers and keep the full coverage of Japanese market.” The firm is currently covering 89% of the equity market cap in Japan.

Nomura has been focused on training new graduates by experienced analysts, and it has also brought in talent from outside its organization. “The results are the outcome of our long-term initiatives over the past several years,” Kunugimoto said.

“All teams including sales, research and corporate access have been collaborating with each other to provide better service to our clients. Our strengths are a strong culture of collaboration and the ability to take necessary action promptly and decisively toward our objectives,” Nomura’s Kunugimoto added.

Meanwhile, AI and other emerging technologies are reshaping the region and the research industry. According to Nomura, the Japanese government growth policy has 17 sectors including AI, but labor-saving technology—especially robotics—is a focus due to the country’s global competitiveness. Additionally, machinery and electronic machinery could be empowered with AI especially if closed data (not open data) matters as Japan accumulated such factory data.

How this will affect research is more nuanced, Kunugimoto added. “From researcher perspective, AI makes it easy to read a foreign language, make a summary and quick memo, and brainstorm,”. “But what is the most exciting, we believe, is well balanced data-driven analysis and text analysis with researchers’ experienced insight and prompts that would add value.

For Japan, uncertainties remain around forex, interest rates, and the political framework after the Lower House elections, which took place on February 8, but there is optimism, according to one head of research.

“Opportunities and obstacles include progress with governance reforms, labor market mobility, energy issues, and the development of new growth industries,” they concluded.