Japanese equities are poised for declines in the second half of this year as political uncertainty drives investors to book profits after the Topix Index hit a 22-month high, according to Goldman Sachs Group Inc.’s chief Japan strategist Kathy Matsui.

Slower Chinese growth and a more hawkish Federal Reserve will also weigh on shares listed in Tokyo, Matsui and colleagues wrote in a report. Her team cut its six-month forecast for the Topix index to 1,575 from 1,600, but raised its 12-month one to 1,700 from 1,650, saying continued profit growth, governance reforms and potential foreign buying should drive the market upward.

The Topix fell 0.8 percent to 1,612 on Friday. It hit 1,627 Thursday, its highest since August 2015.

“The market could be vulnerable to profit-taking,” Tokyo-based Matsui’s team wrote. “However, on a 6-12 month horizon, continued profit growth, ongoing governance reforms, and potential foreign buying should allow the market to regain upward momentum.”

The key risks for Goldman:

• Prime Minister Shinzo Abe is losing support in polls and may reshuffle his cabinet in August or September to bolster his ratings
• Volume of share buybacks is falling, down 40% year-on-year
• Trust banks have become net sellers of stocks
• Next step on Bank of Japan exchange-traded fund buying likely to be a reassessment to shrink the purchases

Matsui is a strategist at Goldman Sachs, where she’s worked since 1994 and has become the firm’s first female partner in Japan. She’s known for her reports on women in the Japanese economy, and the Harvard graduate has been cited by Prime Minister Abe, who has said her proposals were a vital component of his growth strategy.

Here are Goldman’s target levels for the Topix and Nikkei 225 Stock Average:

• Topix three/six/12 months forecasts -- 1,600/1,575/1,700
  • Previously 1,550, 1,600, 1,650
• Nikkei 225 three/six/12 months estimates -- 20,000/19,700/21,250

Goldman is more bearish than its competitors. According to the average estimate of 11 firms in the latest Bloomberg survey, the Topix will be at 1,626 by the end of this year.