Japan Weekly Kickstart 1Q 3 27 results summary

Portfolio Strategy Research 14 August 2026 | 6:04PM JST

Summary of the week Bruce Kirk, CFA | TOPIX: 4,197.20 (3.0%) / NK225: 68,713.80 (4.7%) Goldman Sachs Japan Co., Ltd.

Julius Chan n Top sectors: Services, Mining | Goldman Sachs Japan Co., Ltd.

n Bottom sectors: Oil & Coal , Insurance

In this week’s Japan Weekly Kickstart, we focus on a summary of the 1Q earnings season in Japan. The percentage of companies that reported positive surprises was 64%, compared with only 24% for companies reporting negative surprises. The aggregate net income surprise was +27% versus consensus, and companies revised their full-year RP guidance by close to +5%. In terms of sector contributions, not only did AI-related sectors generally beat high expectations, non-AI related sectors such as banks, autos & parts, and IT & services also made large contributions. We believe that a combination of strong AI demand, a weak yen, and conservative company guidance set during the initial phases of the Middle East conflict have been largely responsible for the increase in positive surprises.

n Strong earnings season reaffirming potential to achieve actual ROE > 10%: As can be seen in Exhibit 6, the strong earnings results are improving TOPIX’s ROE outlook. Combined with strong buyback momentum (Exhibit 7), TOPIX’s ROE may finally break above its long term ceiling of 10% this year. n Good earnings momentum across regions globally: As can be seen in Exhibit 5, earnings revision indices were also strong in other regions, as analysts started to revise up earnings estimates following stronger than expected quarterly earnings. n Corporates’ FX assumptions have changed: The median USDJPY assumption by corporates has increased from ¥151 set at initial guidance to now ¥155, still below the current spot price of ¥159 (Exhibit 12). n Foreigners and Individuals were net sellers, and Domestic Institutions were net buyers: According to the latest data from the TSE, for the week 3-7 Aug, Foreigners and Individuals net sold -¥376bn and -¥132bn of TSE Prime cash equities respectively, and Domestic Institutions net bought ¥1tn.

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Goldman Sachs Japan Weekly Kickstart

Exhibit 1: Positive surprises well exceeded negative Exhibit 2: 15% of companies revised up full-year guidance surprises in 1Q, with aggregate RP revision close to 5% % - reported Guidance revision %of Positive - %of Negative Surprises Cos (lhs) 60% Global CAI (3M-Avg, rhs) 10% %- %- Full-year RP # of by by Rev. # of 8% Rprt Cos Mcap % up:down 40% 6% Topix stocks 1164 97% 99% 4.8 177 : 12

20% 4% Topix (ex-Financials) 1056 97% 100% 5.0 167 : 12

2% Manufacturers 529 98% 100% 7.1 119 : 9 0% 0% Nonmanufacturers 527 96% 99% 2.1 48 : 3

Financials 108 95% 94% 2.5 10 : 0 -20% -2% 3Q 3Q 3Q 3Q 3Q 3Q 3Q 3Q 3Q 3Q 16-1Q 17-1Q 18-1Q 19-1Q 20-1Q 21-1Q 22-1Q 23-1Q 24-1Q 25-1Q 26-1Q

Source: I/B/E/S, Toyo Keizai, FactSet, Data compiled by Goldman Sachs Global Source: I/B/E/S, FactSet, Data compiled by Goldman Sachs Global Investment Investment Research Research

Exhibit 3: 1Q net profit increased by 64% yoy Exhibit 4: Positive surprise across sectors, with high TOPIX constituent companies with Feb/Mar fiscal year ends contribution from non-AI sectors Contribution to 1Q RP surprise Aggregate 1Q Net Profit %- Surprise YoY (%) Banks 21.3% Recur. Net Consensus 19.4% Actual %-point IT & Services Others Profit Profit (7/18) 18.1% 10.6% Topix stocks 23% 27% 33 64 +31 Steel & Nonferrous Metals 4.5% 4.4% Topix (ex-Financials) 20% 26% 39 68 +29 Machinery 4.3% 4.3% Manufacturers 22% 27% 59 97 +38 Construction & Materials 3.4% 3.4% Nonmanufacturers 17% 23% 15 36 +21 Pharmaceutical 2.9% 1.5% Retail Trade 1.2% Financials 38% 34% 14 50 +36 0.8% Real Estate 0.4% 0.2% Energy Resources -0.7%

Source: I/B/E/S, Toyo Keizai, FactSet, Data compiled by Goldman Sachs Global Source: I/B/E/S, FactSet, Data compiled by Goldman Sachs Global Investment Investment Research Research

Exhibit 5: Global earnings revision index Exhibit 6: Strong earnings results is boosting ROE outlook…