Japanese stocks are expected to rise this year to reach levels not seen in nearly three decades, a Reuters poll found, based on expectations the beaten-down global manufacturing sector will once again gather steam.

The median estimate by 26 analysts and fund managers polled Nov. 11-25 put the Nikkei benchmark up 7.3% at 25,000 by end-2020, compared with Monday's close of 23,292.

That forecast is also 2.3% above the Nikkei's October 2018 peak of 24,448, which was its highest since 1991.

The Nikkei has risen 16% this year, with the market benefiting from hopes of a truce in the US-China trade war in the past few months.

"Starting with the silicon cycle, the global economic cycle is starting to look up, and Japanese EPS (earnings per share) will start to rise," said Hiroshi Watanabe, economist at Sony Financial Holdings, referring to the highly volatile economic cycle in the semi-conductor sector.

"But of course that is based on the premise that the US and China will have an agreement on trade," he said.

Others said low interest rates on the dollar after the US Federal Reserve's three rate cuts this year would underpin risk asset prices globally.

"It is hard to expect fiscal stimulus globally, so the improvement in global business sentiment is expected be moderate. But that also means monetary policy will remain accommodative in many countries, keeping long-term bond yields low," said Hisashi Iwama, fund manager at Asset Management One.

Many investors think earnings will recover next year once Washington and Beijing strike a tentative trade deal, possibly unleashing pent-up capital spending demand in the high-tech sector.

Still, some market players noted the Japanese economy is hardly in good shape.

Exports have fallen for about a year and an economic sentiment gauge of service sector workers, closely watched because of their proximity to consumption, slumped to the lowest level since the months following an earthquake and nuclear disaster in 2011.

Koichi Fujishiro, senior economist at Dai-ichi Life Research, sees the Nikkei rising to just 24,000 by end-2020 because the Japanese economy remains weak.

"The current macroeconomic data isn't so strong except for the IT-related sector. I would not expect the sector to falter given promising themes such as 5G, IoT, AI and automatic driving. But for the Nikkei to rise further, other sectors need to recover as well," he said.

Investors also said the US presidential election will be a major risk factor.