With USD/JPY moving below the ¥155 level, views are spreading that the current trend toward yen appreciation will continue. Against this backdrop, past instances in which yen appreciation proved to be a false signal are being reviewed, as interest in stocks resilient to yen appreciation grows.
Since 1980, there have been 61 episodes in which the yen appreciated by 3% or more against the US dollar over a short period. In 35 of these, or approximately 60%, the yen subsequently reversed course and depreciated by 3% or more, constituting a false signal. It has been noted that equity indices tend to rebound early during such episodes.
As for the performance of Japanese equities during periods of yen appreciation, when the appreciation becomes established, TOPIX often moves sideways for around 3–4 months before breaking higher. External-demand and cyclical stocks tend to weaken in the short term, but there are also periods when they outperform the market average.
The differences between the USD/JPY assumption rates used by TOPIX 500 companies and the spot rate, as well as revision trends, are explained. When the spot rate reflects a stronger yen than the assumption rate, earnings forecasts are more likely to be revised downward. However, revisions often bottom at around the same time as share prices begin to rebound ahead of the broader market.
The screening of stocks that benefit from yen appreciation and stocks resilient to yen appreciation is presented, along with the view that while interest in stocks benefiting from yen appreciation increases as the yen strengthens, it gradually shifts toward stocks resilient to yen appreciation. The table lists ticker codes, company names, USD/JPY assumption rates, impact figures and forecast ordinary profit growth rates, among other data. The universe is based on TOPIX constituents with market capitalisation of at least ¥350 billion.