Even after posting strong gains this year, Japan's stocks may continue to push higher, even if the yen doesn't weaken much further.
Japan's recent efforts to stimulate its moribund economy, including Prime Minister Shinzo Abe's growth strategy, dubbed Abenomics, are likely to remain a driving force for the stock market, said Yu-Ming Wang, chief investment officer at Nikko Asset Management.
Abenomics likely offers more than a one-time bump higher as "Japan's population is tired of two decades of anemic and negative growth," he said.
"It will take many years to work through the long-term positives," he said. Despite the Nikkei average already rallying more than 40 percent so far this year, "it's not a three-quarters bounce," he said. By way of comparison, the S&P 500 is up around 21 percent so far this year.
But while much of the advance in Japan's shares has been attributed to expectations the yen will continue to weaken, Wang expects the currency's adjustment to slow, forecasting the yen around 103 against the dollar in 6-12 months. The yen is currently around 98.46, compared with levels around 88 at the beginning of the year.
Nikko AM expects Japan's corporate earnings to rise, not just if the yen weakens, but also if it avoids appreciating, with most companies still projecting the currency to trade around 91 to the dollar.
Others also expect rising corporate earnings to drive share price gains, even if the yen stalls out.
Even though profit margins are already high, "capacity utilization is still quite low. Firms should therefore be able to increase output without having to substantially increase investment in machinery and equipment, which could hurt their bottom line," Marcel Thieliant, an economist at Capital Economics, said in a note. He added, despite labor market tightening, there's no sign of a pickup in wage growth.
Both Nikko AM and Capital Economics expect the yen to resume its downtrend once the U.S. Federal Reserve begins to taper its asset purchases, likely boosting the U.S. dollar, while the Bank of Japan is set to continue easing measures, possibly beyond 2014, which should damp the Japanese currency and increase earnings.
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"The combination of renewed yen weakness, corporate tax cuts and the prospect of further structural reforms should drive additional stock market gains," Thieliant said. He expects the Nikkei to rebound to around 15,500 by year-end. The Nikkei ended Thursday up 0.8 percent at 14,586.51.
—CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1