Japan's stock market has had a blistering run,climbing 20 percent in less than two months on a weakening yen and expectations of aggressive monetary easing. Further gains now come down to the new government and whether it can come true on its pledge to revive an economy in recession, analysts said.
"I think we have got a little bit ahead of ourselves in the Japan markets, because so far all we've seen is expressions of hope and little specific going on," Mikio Kumada, executive director at LGT Capital Partners told CNBC Asia's "Squawk Box" on Thursday. "It (further gains) really depends on how much (Prime Minister Shinzo) Abe and the new government delivers on election promises."
Abe has stepped up pressure on the Bank of Japan to adopt aggressive monetary easing and a higher inflation target. The expectation of monetary easing meanwhile has pushed the yen down about 11 percent since mid-November, with the currency's weakness helping spark life into the Nikkei after several months of lackluster trade.
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The Nikkei's 20 percent gain since mid-November has made it a clear outperformer among the world's major global equity markets, with the S&P 500 up about 7.5 percent and European shares rallying around 7 percent over the same period.
The turnaround in fortunes has prompted many to sound more upbeat on the Nikkei, with analysts polled by Reuters in December forecasting the index to rally to 11,000 this year, a gain of about 3 percent from current levels around 10,660.
Kumada said LGT Capital Partners, an investment firm, had decided not to increase its exposure to Japanese equities for the time being and wait for more signs of a sustainable turnaround.
"The problem is that Japan has a history of disappointing politically. At least Abe has a good chance because he has a strong mandate," said Kumada.
Abe was prime minister in 2006-07. His Liberal Democratic Party and its junior partner New Komeito secured a two-thirds majority in parliamentary elections last month, putting it in a strong position to push through its plans.