Goldman Sachs: Stronger yen could take shine off earnings

• Goldman Sachs is 'overweight Japan' due to the inflation trade driving strong earnings growth (19% forecast for the year).
• Near-term outlook is 'subdued' with 'choppy to down markets' expected in September/October, partly due to yen appreciation impacting USD-denominated earnings.
• Structural bullishness remains, supported by an end to deflation, political stability, and a sensible policy agenda, with markets expected to regain momentum towards year-end.

Goldman Sachs remains structurally bullish on Japanese equities, driven by the inflation trade and strong earnings growth, with a 19% forecast for the year. However, the near-term outlook is more subdued due to the Bank of Japan's policy normalization and potential yen appreciation impacting USD-denominated earnings. Markets are expected to be choppy in the short term before regaining momentum.