A strategist at a major US securities firm said that Japanese stocks could rise further if structural yen weakness continues. Yen weakness is expected to provide a tailwind for export and financial stocks.
A strategist at a major US securities firm said that Japanese stocks could rise further if structural yen weakness continues. Export-related and financial stocks, in particular, are likely to benefit from the earnings boost provided by a weaker yen.
In the past, the yen surged and Japanese stocks, particularly export and financial stocks, fell sharply following an unexpected Bank of Japan rate hike and yen intervention in 2024. The current environment, however, differs from that period. The Bank of Japan’s September rate hike is already priced in, and USD/JPY has recovered after moving sharply toward a stronger yen.
The market remains firmly of the view that the Bank of Japan will proceed with monetary policy normalization at a gradual pace, with some expecting it to remain behind the curve in responding to inflation. Despite rising government bond yields, USD/JPY is trading around ¥160, and comments intended to encourage yen appreciation have not led to sustained yen strength.
The benefits of yen weakness are clear in the stock market, with TOPIX up more than 20%. Strong earnings at Japanese companies have been supported by yen weakness, and companies continue to assume that the yen will remain on a weakening trend against the US dollar.