Japan's stocks may have surged more than 40 percent so far this year, but some analysts believe they are poised to climb even higher.
"The outlook for certain sectors and certain stocks is extremely positive right now," said Nicholas Weindling, fund manager for JPMorgan Asset Management, adding he likes real-estate stocks as land prices are starting to rise.
Rising inflation expectations are a key driver, he said. "In the past, people would delay their purchases. Now there's a reason to buy," he said. "It doesn't matter whether its land or other kinds of goods."
JPMorgan is keeping a strong domestic bias, focusing on financial, retailer, cement, construction and Internet plays.
While some are concerned that the upcoming consumption tax may derail Japan's economic recovery, Weindling noted it's been discussed at length and is well-known by the market.
"The important thing is to focus on the data, which is getting better and better," he said, citing recent readings on gross domestic product (GDP), consumer spending and unemployment data.
In a recent report, Nomura said it expects rising inflation expectations, in combination with plans to spur greater competition by joining the Trans-Pacific Partnership (TPP) free-trade agreement, could signal "twenty years of value traps in Japan could be ending."
Entrenched deflationary expectations have encouraged companies to use free cash flow to pay down debt, but as real interest rates turn negative in Japan, dividends could become the biggest growth area for cash deployment over the next year, followed by mergers and acquisitions and capital spending, the house said.