Investing.com– The rally in Japanese stocks slowed significantly after the first quarter of 2024 as the Nikkei 225 index fell below record highs, although Goldman Sachs analysts said they saw no reason to be overly bleak about the market.

In the first quarter, the company reached a record level of 41,087.75 points. However, since then, the index has been stuck in a range well below 40,000 points, driven by a combination of concerns about a frail economy, a sluggish economy and frail consumer spending.

Japanese companies also saw somewhat disappointing earnings prospects for the coming quarters, despite mighty earnings in the March quarter.

While this meant some headwinds in the brief term, Goldman Sachs analysts said the recent share price declines were likely to be offset by optimism about a possible upward revision to earnings forecasts.

“As investors familiar with the Japanese stock market are well aware, initial guidance from Japanese corporations tends to be skewed toward the conservative side,” Goldman Sachs analysts said in a note.

They said the negative price reaction to the conservative guidance likely came from recent investors in Japanese markets over the past year. The strength of Japanese shares attracted a multitude of foreign investors to the market.

Goldman Sachs analysts also expressed optimism about changes to corporate governance structures made in the quarterly results.

They said the “significant increase” in share buyback announcements deserved special attention and value for investors.