Japan Weekly Kickstart Has it been better to travel or to arrive with the BOJ

Portfolio Strategy Research 18 September 2026 | 8:23PM JST

Has it been better to travel or to arrive with the BOJ?

Summary of the week Bruce Kirk, CFA | TOPIX: 4,091.14 (1.6%) / NK225: 65,018.95 (1.6%) Goldman Sachs Japan Co., Ltd.

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

n Bottom sectors: Securities, Banks

In this week’s Japan Weekly Kickstart, we provide feedback from our recent client marketing trip to Europe, and focus on Bank sector performance given the BOJ’s decision to raise policy rates in the September MPM. We presented to 18 European clients this week. These were mostly Long Only investors, but we also met with a number of Macro, Event Driven and Equity Long-Short funds. The main discussion points were: 1) Is the AI trade over?; 2) How many times will the BOJ hike between now and year-end?; 3) Can a strengthening yen co-exist with a rising Japanese equities market?; 4) What could trigger the next big correction in North Asia / Japan?; and 5) Why is there so little interest in thematics like Defense / Economic Security, Corporate Governance and Activism? Sentiment was somewhat muted and concentration risk and volatility were common concerns.

n BOJ rate hike: The BOJ held its MPM on September 17-18, and, as our Economists had expected, raised the policy rate from 1.0% to 1.25%. As can be seen in Exhibit 2, Banks have on average outperformed TOPIX by 5ppts in the 60 trading days leading up recent monetary policy changes, and by 4ppts in the 60 days after. The one big exception being the July 2024 move. n Banks performance ytd: So far this year Banks have been the best performing sector, outperforming TOPIX by 27ppts ytd and 10ppts qtd (Exhibit 3). n Speculative yen positioning unwind: As can be seen in Exhibit 4, yen positioning among non-commercial (speculative) investors has now flipped to a net long position, following the recent strengthening of the yen. n Domestic Institutions and Foreigners were net sellers, and Individuals were net buyers: According to the latest data from the TSE, for the week Sep 7-11, Domestic Institutions and Foreigners net sold -¥476bn and -¥274bn of TSE Prime cash equities respectively, and Individuals net bought ¥426bn.

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Goldman Sachs Japan Weekly Kickstart

Exhibit 1: BoJ raises policy rate to 1.25% Exhibit 2: TOPIX relative returns of banks before/after BOJ rate hikes -60D -20D -5D +5D +20D +60D TOPIX17 Banks (indexed, lhs) TOPIX (indexed, lhs) MPM meeting Japan 10Y Yield (%, rhs) Policy rate (%, rhs) Mar- Dec 22 MPM > Jan 25 MPM Jun 26 MPM 680 Mar 24 MPM > BoJ raises BoJ raises BoJ widens the BoJ ends Jul- -year band policy rate to policy rate to 4.5 0.5% 1.0% Jan- Jul 24 MPM Dec 25 MPM Jul 23 MPM > BoJ raises BoJ rasies 3.5 Dec- BoJ adjusts Yield policy rate to policy rate to 480 Curve Control 0.25% 0.75% Jun- GS 2.5 380 estimates... Sep-

80 -0.5 01/22 07/22 01/23 07/23 01/24 07/24 01/25 07/25 01/26 07/26 01/27

Source: FactSet Source: FactSet, Data compiled by Goldman Sachs Global Investment Research

Exhibit 3: Banks and Financials have rallied in Q3 Exhibit 4: Yen positioning among non-commercial (speculative) investors turned positive

TOPIX 17 Banks / TOPIX TOPIX 17 Financials (ex Banks) / TOPIX $bn Non-Commercial Asset Managers Leveraged Funds

Source: FactSet, Data compiled by Goldman Sachs Global Investment Research Source: CFTC, Haver Analytics, Goldman Sachs Global Investment Research

Exhibit 5: Banks contribution to TOPIX NTM EPS change Exhibit 6: TOPIX tends to absorb rise in JGB yields, but Data as of Sep 17, 2026 tends to decline on sudden moves TOPIX average weekly performance under different SD ranges of 10Y JGB change, past 3 years

TOPIX average weekly performance vs changes in 10Y JGB in SD 25% Non bank related NTM EPS change 25% of which Banks related 1.0% TOPIX NTM EPS change 0.5% 20% 20% 0.0% -0.5% 15% 15% -1.0% -1.5% -2.0% 10% 10% -2.5% -3.0% 5% 5% -3.5% -4.0% < -2 (-2, -1) (-1, -0.5) (-0.5, 0) (0, 0.5) (0.5, 1) (1, 2) >2 0% 0% 1/26 2/26 3/26…