Investment Rating - The report indicates a positive outlook for Japanese companies, with expectations of a 3% year-on-year increase in capital expenditure (capex) for FY2025 despite rising uncertainties [5][7]. Core Insights - The capex expansion cycle for Japanese companies continues, particularly in sectors such as semiconductors, automation, power transmission and distribution, and inbound tourism [1][5]. - Corporate profit margins and return on assets (ROA) have reached record levels, with expectations for further improvement due to ongoing corporate balance sheet reforms initiated in FY2023 [1][27]. - Promising companies identified for future growth include Hitachi Construction Machinery, Sojitz, Nippon Yusen, Capcom, SCREEN Holdings, and Tokyo Electron, which are expected to benefit from increased capex and improved profit margins [1][63]. Summary by Sections Capex Trends - Capex has been in an expansion cycle since FY2022, with significant investments in semiconductors, automation, and inbound tourism projected to continue into FY2025 [4][5]. - The manufacturing sector is seeing increased capex driven by digitalization and AI, particularly in semiconductor capacity and electric vehicle (EV) battery production [7][8]. Sector Performance - Key sectors expected to see accelerated capex include machinery, real estate, retail, and automobiles, with ROA improvements noted in machinery, chemicals, steel, and IT & services [4][48]. - Historical data shows that during previous capex expansion phases, sectors such as machinery, automobiles, and chemicals experienced significant profit margin growth [45][46]. Promising Companies - Companies such as Hitachi Construction Machinery, Sojitz, Nippon Yusen, Capcom, SCREEN Holdings, and Tokyo Electron are highlighted for their strong capex plans and potential for increased profit margins and ROA [1][63].