{"id":1457428,"date":"2024-02-15T04:25:11","date_gmt":"2024-02-15T09:25:11","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1457428"},"modified":"2024-02-15T04:25:11","modified_gmt":"2024-02-15T09:25:11","slug":"yens-big-sway-on-japanese-shares-fades-to-a-myth","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/yens-big-sway-on-japanese-shares-fades-to-a-myth\/1457428\/","title":{"rendered":"Yen’s Big Sway On Japanese Shares Fades To A Myth"},"content":{"rendered":"

Yen’s Big Sway On Japanese Shares Fades To A Myth<\/span><\/p>\n

\n

By Hideyuki Sano, Bloomberg markets live reporter and strategist<\/em><\/p>\n

The conventional wisdom in the Japanese market that a cheaper yen benefits exporters and boosts share prices has been turned on its head.<\/p>\n

In reality, the yen\u2019s exchange rate is having less and less of a bearing on Japanese stocks. <\/strong>The correlation between the\u00a0Topix index\u00a0and the\u00a0dollar\/yen\u00a0rate since July has been 0.23, a level statisticians would judge as pretty weak. The link between the yen and the\u00a0Nikkei 225\u00a0during the same period is even slightly negative.<\/p>\n

The chart below illustrates the point. Blue dots show where the yen and the Topix were each day since July. When Japan\u2019s currency was at 150 against the dollar, the Topix was lower. In 2022 the Topix hardly reacted to the yen\u2019s exchange rate, stuck mostly between 1,800 and 2,000, as shown by the gray dots.<\/p>\n

The relations between the dollar\/yen and the Topix since 2022.<\/p>\n

<\/a><\/p>\n

The loss of connection between the yen and share prices is no surprise given how Japanese exporters have changed. Successful companies such as\u00a0Sony Group Corp.\u00a0and\u00a0Hitachi Ltd.\u00a0have long ditched their old models of exporting goods manufactured in Japan, making their business more global and diversified.<\/p>\n

\u201cSome people say a cheap yen will benefit exporters, but the impact of that is very limited after the hollowing-out of the domestic manufacturing base,\u201d said Seiya Nakajima, visiting professor of international finance at Fukui Prefectural University.<\/p>\n

The only period when the Topix appeared to be correlated to the yen is the first half of 2023, (shown by the orange dots), with the index higher when the currency was cheaper.<\/p>\n

But the connection appears tenuous: during that period Japanese shares had their own drivers, such as\u00a0Warren\u00a0Buffett\u2019s investment in trading firms as well as hopes about corporate governance improvements, suggesting any boost from the yen was secondary.<\/p>\n

\u00a0<\/a><\/p>\n

Hitachi\u2019s earnings before interest, taxes and amortization increased by just\u00a0\u00a5200 million\u00a0($1.3 million) for each one yen depreciation against the dollar. As for Sony, the\u00a0net impact\u00a0of yen moves on its earnings is relatively limited.<\/p>\n

For many chip-related companies, the outlook for that sector overseas as well as the global economy has a far-larger impact than the foreign-exchange rate. Against this backdrop, the correlation between the dollar\/yen rate and the\u00a0Topix Electronics Appliance index\u00a0– the biggest segment of the stock market with a 17% weighting – has decreased since the pandemic.<\/p>\n

This isn\u2019t to say that a cheaper yen has no benefit. It still brings currency translation gains for Japanese companies\u2019 earnings on big overseas sales. Automaker shares continue to have a strong correlation with the yen as they export a lot of vehicles. While that weakened in 2022 when chip shortages hobbled their output, the link between Japanese carmakers and the yen came back last year.<\/p>\n

Still, automakers account for just 9% of the Topix. And the perception that Japan\u2019s economy is export-driven also needs a reality check. Japan\u2019s exports have stagnated so much over the past decade in part due to a production shift abroad and the loss of competitiveness. It\u2019s the only major economy that saw exports decline over the last decade.<\/p>\n

It\u2019s little wonder, then, investors don\u2019t buy Japanese stocks just because the yen is cheap.<\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nWed, 02\/14\/2024 – 23:25<\/span><\/p>\n

\u200bRead More<\/a>\u00a0<\/p>\n

\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

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