Japan stocks rally faces a key earnings test as Middle East tensions raise costs and risks

Earnings look solid, but energy and inflation worries loom

Japan’s equities head into earnings season with a strong starting point, supported by tech optimism and ongoing reforms. Yet Middle East tensions are injecting uncertainty, threatening growth, inflation, and energy costs. Even as earnings expectations stay relatively resilient, investors are growing cautious that external shocks could stall a rally that has already gained strong momentum.