Goldman Sachs Japan weekly preview: critical resources basket has sharply outperformed, and positive surprises dominate TOPIX fiscal Q4 results

Overview

This Goldman Sachs Japan Weekly Kickstart report centers on three main themes: first, a review of the performance of theme baskets such as GS Japan Critical Resources (GSJPCRTR) and GS Japan Critical Technologies (GSJPCRTT); second, a summary of FY3/26 fiscal Q4 earnings releases for TOPIX companies as of May 14; and third, an observation of Japan's short-term trading environment through market fund flows, price reactions, valuation performance, and sector rotation.

Core views

The report's core view is that Japan's critical resources theme remains one of the strongest recent performers, with GSJPCRTR substantially outperforming TOPIX and likely to remain in focus amid continued volatility in Middle East geopolitics. On the earnings side, positive surprises among reported TOPIX companies outnumber negative ones, but the overall improvement in profits has been driven materially by Softbank Group; excluding it, the improvement is not obvious. In terms of market reaction, negative earnings surprises have hit high-momentum stocks more hard, while positive surprises have received limited reward, suggesting that style positioning and crowded trades remain important variables during earnings season.

Analysis framework

The report uses a combination of theme-basket performance tracking, TOPIX earnings-release statistics, sector earnings-surprise comparisons, fund-flow monitoring, and segmented indices built from a liquid stock universe. Its Japanese liquid equity universe is defined as stocks with six-month average daily turnover above US$20mn, and that universe is split into 45 equal-weighted indices covering MSCI sectors, sub-industries, and cross-sector themes to observe sector/theme performance, best-versus-worst constituent spreads, and internal market dispersion.

Methodology notes

• Stock universe constructionLiquid Japan equities universe

  High-liquidity Japanese equity universe

  The report limits the Japanese equity research universe to stocks with six-month average daily turnover above US$20mn; as of December 17, 2025, the universe contained 271 stocks and is intended to be refreshed annually.

• Theme indicesGS sector and thematic equal-weighted indices

  Equal-weighted sector and thematic indices

  The report splits the liquid stock universe into 45 equal-weighted indices covering MSCI sectors/sub-industries and cross-sector themes such as high dividend, gaming, and critical resources; the same stock may appear in multiple indices.

• Earnings analysisEarnings surprise analysis

  Earnings surprise statistics

  The report compares reported earnings with IBES consensus expectations, calculates the proportions of positive surprises, in-line results, and negative surprises, and examines them across TOPIX, ex-financials, manufacturing, non-manufacturing, and financials groupings.

• Market structureBest-Worst spread

  Best-vs-worst constituent spread

  The report measures internal dispersion and trading opportunity by the difference between the best-performing and worst-performing constituents within each index.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• GSJPCRTR

  Japan Critical Resources thematic basket

  Strengths

  Supported by economic security, critical resource extraction/transportation/processing demand, and volatility in Middle East geopolitics, it has significantly outperformed TOPIX year to date.

  Weaknesses

  Its performance has already pulled far ahead, so it may be more sensitive to any easing in geopolitical tensions or shifts in demand expectations across the resource chain.

  Comparison

  The report says GSJPCRTR is up about 43% year to date versus about 12% for TOPIX; the chart shows the basket accelerating its outperformance since the start of 2026.

  Risks

  A cooling of geopolitical tensions, a pullback in resource prices, crowded thematic positioning, and liquidity constraints could weaken future performance.

• GSJPCRTT

  Japan Critical Technologies thematic basket

  Strengths

  Also tied to the economic security theme; the chart shows it has outperformed TOPIX somewhat since April 2026.

  Weaknesses

  Overall gains are smaller than GSJPCRTR, and its earlier trend was closer to TOPIX.

  Comparison

  The chart suggests the latest index level for GSJPCRTT is around 155 to 160, TOPIX around 138 to 140, and GSJPCRTR around 220.

  Risks

  Changes in technology-theme valuation, global risk appetite, and policy expectations could introduce volatility.

• TOPIX

  Core benchmark for the Japanese equity market

  Strengths

  Among the earnings releases, positive surprises outnumber negative surprises, and aggregate fiscal Q4 net profit growth is above consensus.

  Weaknesses

  Excluding Softbank Group, TOPIX fiscal Q4 improvement is basically in line with consensus; manufacturing data is relatively weak.

  Comparison

  TOPIX is up about 12% year to date, materially lagging GSJPCRTR.

  Risks

  Conservative corporate guidance, the strong impact of negative surprises on momentum stocks, and high concentration in market performance.

• TSE Prime cash equities

  Primary Japanese listed equities universe for flow monitoring

  Strengths

  Foreign investors were net buyers of about ¥1.2tn in the latest week, indicating that overseas capital continues to flow in episodically.

  Weaknesses

  Domestic institutions and individuals were both net sellers, suggesting limited local investor support.

  Comparison

  The scale of foreign net buying exceeded the individual net-selling amounts of domestic institutions and individuals.

  Risks

  If foreign inflows reverse, they could pressure short-term market liquidity and index performance.

Key data

• GSJPCRTR year-to-date performance+43%The report says the GS Japan Critical Resources basket is up about 43% year to date and has clearly outperformed TOPIX.
• TOPIX year-to-date performance+12%As the comparison benchmark, TOPIX is up about 12% over the same period.
• TOPIX fiscal Q4 reporting coverage84% (by market cap)As of May 14, 84% of TOPIX companies with February/March fiscal year-ends had reported fiscal Q4 results by market capitalization.
• TOPIX positive earnings surprise ratio54%Among the reported sample, the proportion of positive surprises is higher than negative surprises.
• TOPIX negative earnings surprise ratio35%The negative-surprise ratio is lower than the positive-surprise ratio, but still indicates earnings dispersion.
• TOPIX fiscal Q4 net profit growth vs consensus+16 percentage pointsAt the aggregate level, TOPIX fiscal Q4 net profit growth is 16 percentage points above consensus.
• TOPIX FY3/26 net profit growth vs consensus+2 percentage pointsThe improvement at the full-year level is smaller and, excluding Softbank Group, is basically close to consensus.
• Foreign net buying of TSE Prime cash equitiesabout ¥1.2tnIn the week of May 7-8, foreign investors were net buyers.
• Domestic institutional net sellingabout ¥457bnDomestic institutions were net sellers in the same week.
• Individual investor net sellingabout ¥468bnIndividual investors were also net sellers in the same week.

Impact & implications

For portfolios, the report suggests that thematic opportunities in Japan remain concentrated in critical resources, economic security, and geopolitically related exposures, but the earnings season is not broadly strong; excluding a few large contributors, the improvement in profitability is limited. For short-term trading, the stronger punishment of negative surprises among high-momentum stocks is worth paying close attention to, implying that the interaction between crowded positioning, momentum, and earnings confirmation may amplify price volatility.

Risks

• If Middle East geopolitics ease, the risk premium and trading attention on the critical resources theme may decline.
• TOPIX earnings improvement is heavily influenced by a few large-cap names; excluding Softbank Group, the overall improvement is limited.
• Corporate FY3/26 guidance is more conservative than usual, which may cap the scope for upward earnings revisions.
• High-momentum stocks react strongly to negative earnings surprises, and if positioning is crowded, drawdowns may be amplified.
• Trading in the report's theme baskets is affected by market conditions, liquidity, and stock-borrow constraints.

What to watch

• Whether GSJPCRTR continues to extend its outperformance versus TOPIX.
• Whether geopolitical developments in the Middle East and critical-resource supply chain news continue to support thematic demand.
• Whether the positive/negative earnings-surprise mix changes as the remaining TOPIX companies report.
• Whether TOPIX earnings revisions improve after excluding Softbank Group.
• Whether foreign net buying of TSE Prime cash equities can continue.
• Whether the price reaction of 1-month momentum stocks continues to favor punishing negative surprises in subsequent earnings announcements.