Is Mitsubishi UFJ Financial Group, Inc. (MUFG) The Best Japanese Stock To Buy In 2025?

We recently compiled a list of the 12 Best Japanese Stocks To Buy in 2025. In this article, we are going to take a look at where Mitsubishi UFJ Financial Group, Inc. (NYSE:MUFG) stands against the other Japanese stocks.

As the dangers of natural disasters increase and the expenses of social security continue to rise, the International Monetary Fund says Japan has to take quick action to strengthen its fiscal situation. The IMF’s warning comes as Japan increases spending to meet a wide range of requirements, from initiatives to improve the birth rate to strengthening national security. This occurs concurrently with its borrowing costs gradually increasing due to rate rises by the Bank of Japan in the past year. Japan already has the highest amount of public debt of any major country. According to a Finance Ministry estimate released this January, the nation’s debt payment expenses are expected to increase by 25% by fiscal year 2028 compared to the previous year, assuming a 3% annual economic growth rate and 2% inflation. Overall, the IMF forecasts that Japan’s public debt will be 232.7% of GDP this year. In addition, at its January 24 meeting, the Bank of Japan voted to boost interest rates to 0.50%, the highest level in seventeen years. The current approach comes after decades of the BOJ’s efforts to normalize interest rates. Despite the increasing balance sheet risk, the bank may be pushed to hike interest rates further if it observes a “virtuous cycle” of rising prices and rising wages, with board member Naoki Tamura stating that raising short-term interest rates to “at least around 1%” by the second half of fiscal year 2025 is “necessary”.

According to a Statistics Bureau of Japan estimate, average household expenditure in Japan in December was 352,633 yen ($2,332), up 7% in nominal terms from the previous year. In addition, Reuters revealed that Japanese household spending rose year-over-year in December 2024 for the first time in five months, and at a far faster rate than expected. However, the Japanese government notes that it was premature to call a bottoming out in the decreasing trend in consumption. Consumer expenditure also grew 2.7% in the same month compared to the previous year, above the median market forecast of 0.5% growth.

The current environment around Japanese markets is one of concern and relief, especially after U.S. President Donald Trump announced tariffs on steel and aluminum imports. Trump’s threats to impose retaliatory tariffs on “everyone” have served as a harsh reminder of the dangers that all of America’s trading partners, including Japan, face. With Trump aiming to reduce his country’s trade imbalance with Japan, Japanese Prime Minister Shigeru Ishiba pledged to purchase more American LNG and disclosed plans for manufacturers such as Toyota and Isuzu Motors to invest more in the United States at their summit meeting on February 7. Homin Lee, senior macro strategist at Lombard Odier in Singapore, had the following to say about the meeting:

“The friendly tone and substance of the summit, especially in regard to Japan’s high profile investment in the U.S. steel sector, should provide a modest relief to Japanese investors.”

For this list, we compiled a list of US-listed Japanese stocks using stock screeners. We then chose the best Japanese stocks based on overall hedge fund sentiment toward each stock. We have assessed the hedge fund sentiment from Insider Monkey’s database of 900 elite hedge funds tracked as of the end of the third quarter of 2024. The list is arranged in ascending order of the number of hedge fund holders in each company.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Is Mitsubishi UFJ Financial Group, Inc. (MUFG) the Best Japanese Stock to Buy in 2025?

A smiling employee in front of a modern building surrounded by a vibrant cityscape.

Number of Hedge Fund Holders: 18

Mitsubishi UFJ Financial Group, Inc. (NYSE:MUFG), one of Japan’s largest banking institutions, is a bank holding company that operates through a number of segments, including Digital Service, Retail & Commercial Banking, and Japanese Corporate & Investment Banking, among others.

Mitsubishi UFJ Financial Group, Inc. (NYSE:MUFG) posted a 32% increase in quarterly net profit on February 4. This gain was fueled by cross-shareholding sales and profit increases when interest rates in Japan rose. Profit from October to December totaled JBY 490.74 billion, a massive increase above the JBY 370.64 billion reported a year earlier.

Following these results, DBS analyst Lim Rui Wen maintained a Buy rating on MUFG with a price target of JPY 2,150. The Bank of Japan’s normalization of monetary policy is only one of several factors projected to boost MUFG’s growth and profitability, along with an increase in domestic lending operations and spreads.

Insider Monkey’s data revealed that 18 hedge funds held stakes in Mitsubishi UFJ Financial Group, Inc. (NYSE:MUFG) as of the end of fiscal Q3 2024.

Overall MUFG ranks 3rd on our list of the best Japanese stocks to buy. While we acknowledge the potential of MUFG as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MUFG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.

Disclosure: None. This article is originally published at Insider Monkey.

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