The factors supporting Japanese stocks' resilience to yen appreciation are diversifying, and their reliance on the currency is expected to diminish. Earnings drivers are increasing beyond specific sectors, including automobiles, with a phase of margin improvement anticipated.
According to views reported by Bloomberg, lower costs resulting from yen appreciation would improve corporate margins first, with earnings improving before actual price cuts take place. While yen appreciation would weigh on the automotive sector, a key export industry, the share of automotive stocks in total market capitalization has also declined, some observers point out.
For companies, stability in the yen exchange rate is more important than the exchange rate itself. A sharp appreciation of the yen would make it harder for companies to respond, while a sharp depreciation would raise concerns about its impact on consumption, according to some views. Gradual yen appreciation is seen as a factor that would make Japanese stocks easier for overseas investors to buy.