While a stronger yen is putting pressure on export companies’ profits, the combination of higher interest rates and a stronger yen could benefit banks, insurers and domestic companies, prompting discussion of new investment opportunities in the Japanese market.
For Japanese companies, a stronger yen reduces the yen value of overseas profits, and is seen as potentially putting short-term downward pressure on export-related companies and major stock indexes.
Meanwhile, Japan is expected to enter a phase in which interest rates, long held at low levels, rise. This could improve banks’ and insurers’ lending margins and investment income, according to some views.
A stronger yen could also curb import costs and support consumers and domestic companies. Investors are therefore closely watching developments in both equities and foreign exchange.