Asian markets kicked off 2026 with strong energy, hitting record highs in Japan, Singapore, and South Korea. There’s growing interest in stocks outside the U.S. due to worries about U.S. tariffs and high tech valuations. Japan is becoming a top choice for investors, fueled by new fiscal policies and changes in shareholder rules. The Nikkei 225 soared over 27% in 2025, and many analysts expect this trend to continue.

Investment Opportunities in Japan

The Japanese stock market offers great investment chances, with a forward P/E ratio just above 15, compared to the U.S. at 22. This suggests that Japanese stocks might be undervalued, not fully reflecting positive changes in corporate governance. Japan plays a big role in the global tech supply chain, especially in semiconductor production. Companies like Tokyo Electron and Shin-Etsu Chemical make vital components for AI technologies. Japan’s commitment to AI through initiatives like the AI Promotion Act boosts its appeal. This law encourages research and development, drawing more investment into the AI sector. Japan’s leadership in factory automation and robotics enhances its tech influence, providing stability amid global supply chain challenges. Japanese manufacturers benefit from rising demand thanks to their strong position in the tech supply chain and supportive government actions.

Nikkei 225 Investment Strategies

The Nikkei 225 is maintaining its strong momentum from 2025 into the new year. Given this trend, buying call options on the index in the upcoming weeks can be a smart way to benefit from potential gains. This approach offers leveraged upside while keeping our maximum risk limited to the premium we pay. The ongoing valuation gap with U.S. markets is crucial. Throughout 2025, the Nikkei’s forward P/E ratio was around 15, while the S&P 500’s was over 20. This indicates that Japanese stocks aren’t overly priced, making strategies like bull call spreads on Nikkei 225 futures appealing. This method limits our initial costs while allowing us to profit if the index continues to rise. We should also consider the tech supply chain, which was a major growth driver last year. Companies like Tokyo Electron are key players in the global AI expansion but don’t have the extreme valuations seen in American tech firms. Buying call options on these stocks or a tech-focused ETF could provide focused exposure to this trend. The yen’s stability against the dollar, even as the Bank of Japan raised rates to 0.75% in 2025, lessens a significant risk for our investments. This stability, alongside strong market fundamentals, makes selling out-of-the-money put options on the Nikkei 225 an attractive strategy. We can earn premium from this trade, benefiting from time decay and the expectation that the market won’t experience a sharp drop. Create your live VT Markets account and start trading now.

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