(Bloomberg) -- The recent rally in Japanese stocks that has pushed the Nikkei 225 Stock Average ahead of all of the world’s major benchmarks has further to run, according to Goldman Sachs Group Inc. and Nomura Holdings Inc.

An influx of foreign funds, solid earnings and signs of sustainable inflation are among the factors cited by sell-side strategists to remain bullish. Benefits of a weak yen and the Bank of Japan’s continued easy-money policy are other reasons why the Nikkei 225 has surged 19% this year, trading around a 33-year high and eclipsing global peers.

“We see the recent strength of Japanese equities as arising from a combination of an accumulation of longer-term bullish stories, the evaporation of some short-term worries, and buying by nonresident investors,” Nomura strategists including Yunosuke Ikeda wrote in a note. The nation’s largest brokerage sees the Nikkei reaching a high of 33,000 in July, implying upside of more than 6% from the current level.

Goldman says the recent results season was “additional fuel for investors’ bullish stance on Japanese stocks, providing some reassurance on the earnings outlook.” Other tailwinds include companies with low price-to-book ratios unveiling measures to improve their valuations, strategists Kazunori Tatebe and Bruce Kirk wrote in a report.

Overseas traders were net buyers of about $9 billion worth of Japanese stocks and futures in the week ended May 19, according to exchange data, marking a seventh-straight week of inflows. Domestic investors have been selling, however, and their return is seen as important also if there is hope for the Nikkei 225 to climb back toward its all-time high of nearly 39,000.

The Goldman strategists also note that shares aren’t looking quite as cheap as they had been until recently, though further corporate reforms could set new parameters. “If progress is made in accordance with investor expectations, Japanese stocks could see a prolonged advance over the medium term, and we continue to see risk to the upside,” they wrote.

 

--With assistance from Aya Wagatsuma.

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