When the yen strengthens, the yen-denominated performance of the All Country fund and S&P 500 declines under the influence not only of share prices but also of currency movements. Actual data shows the difference between returns in U.S. dollars and yen.
This article explains that when the yen strengthens, the yen-denominated returns of the All Country fund and S&P 500 are affected by currency movements multiplying the effect of share-price movements. Because these funds generally do not hedge currency exposure, the yen-denominated net asset value falls when the yen strengthens and rises when the yen weakens, the article says at the outset.
As an actual-data comparison, it cites the 19.44% decline in the S&P 500 in U.S. dollars in 2022, versus a more limited 6.1% decline in the yen-denominated eMAXIS Slim U.S. Equity (S&P 500) fund. The article notes that the strengthening yen affected this difference.
Over a cumulative 7-year period, the difference widened substantially during periods of yen depreciation. From 2021 to 2024, yen depreciation helped yen-denominated performance exceed the dollar-denominated index, while the article explains that the difference may narrow when the yen strengthens.
Approximately 95% of the All Country fund consists of foreign-currency-denominated assets, while U.S. dollar-denominated U.S. equities account for approximately 64.5% of the S&P 500 fund, meaning that both are subject to currency movements. The article again confirms that these funds are premised on not using currency hedges and suggests considering the proportion of foreign-currency-denominated assets in one's overall portfolio as part of risk management when the yen strengthens.