The start of an inflationary regime, coupled with the Tokyo Stock Exchange’s valuation reforms, will boost Japanese stocks to their record high as early as the first half of 2025, according to BofA Securities.

“We believe the stock-market high of 1989 set during the Bubble Economy will come into sight again, should a core consumer price index of 1.5% or more takes hold in Japan and return on equity rises into the double digits,” chief Japan equity strategist Masashi Akutsu wrote in a note dated Tuesday.

BofA’s projections echo that of other Wall Street firms, which see further room for the rally in Japan stocks to run. Strong interest from foreign investors, solid earnings, and a weak yen should continue to support a climb in the Topix Index.

While equities may hit a speed bump in the near term, BofA said there was “no need to be bearish if the market rises in line with fundamentals.” The current investment environment remained favorable post-reopening of the economy and with the strengthening of inflation.

The Topix Index closed 1.3% lower Wednesday as China’s weak manufacturing data weighed on sentiment.