Why global speculators love the yen
The Japanese yen is the sweetheart of global speculators. Speculators loath uncertainty but thrive on calculated risk, and the yen offers unparalleled favorable odds for fast-paced global money managers.
Incredible but true, it is with almost 100 percent certainty that any new crisis or sudden bad news in global markets will force a sharp yen appreciation. This was true for the Brexit shock, the recent trade war fears, North Korean missile tests, Japanese earthquakes — you cannot find a global shock that did not result in an immediate surge in the yen. There is no other asset class in the world that offers as much predictability, which is why the yen is loved by speculators around the world.
For Japan, the extraordinarily high sensitivity of its currency to global events is a serious problem. As a de facto lightning rod for global thunderstorms, the yen’s rise brings local disaster. In fact, every economic downturn over the past five decades was preceded by the yen’s appreciation.
There is a clear cause and effect: Almost two-thirds of Japanese companies’ profits come from exports or global sales (through offshore production). So when the yen gets stronger, those overseas earnings translate into less yen.
Clear speak: Corporate Japan’s profits take a big hit when the yen goes up; a ¥1 appreciation cuts profits by almost a full percentage point. This is where the vicious cycle starts that leads from yen appreciation to recession. Lower profits quickly translate into lower bonus payments for Japanese employees, which depresses consumer spending.
In addition, lower profitability for large exporters quickly forces them to demand price cuts from local suppliers and merchandisers. In Japan, the link between large multinationals and local small and medium-size companies is very close. A negative and deflationary feedback loop is quickly started if the yen’s appreciation is sustained.
The negative impact of yen appreciation on corporate profitability is why there is such a strong negative correlation between Japanese stocks and the currency. Almost 90 percent of the time, the yen’s appreciation forces Tokyo stocks to drop. Again, investors and speculators love this sort of high probability and steadfast causality. Yes, it is good investment advise: On any signs of global troubles, go long on the yen and short-sell Japanese stocks.
News On Japan - Nov 26
Panicked passengers on a Shinkansen bullet train were evacuated at a central Japan station on Friday night, after a plastic bag containing suspicious liquid was found onboard.
News On Japan - Nov 26
A 29-year-old man has been arrested for meeting an underage teen girl, with sexual intent, after sending her messages, promising to make her "the happiest in the world".
News On Japan - Nov 25
Inui Street, the famed autumn walk within the Imperial Palace in central Tokyo, opened to the public from Saturday.
News On Japan - Nov 25
Nissan Motor Corporation has announced plans to transition all its vehicles produced in the United Kingdom to electric vehicles (EVs).
News On Japan - Nov 25
A JR West Japan train conductor has been arrested for secretly filming eight women in the toilet of the express train "Haruka" while on duty.
News On Japan - Nov 25
Tofukuji Temple, home to 2,000 maple trees and renowned as one of Kyoto's premier autumn hotspots, features the Tsutenkyo Bridge, and the breathtaking 'sea of autumn leaves'.
News On Japan - Nov 25
The strongest cold snap of the season has brought a dramatic drop in temperatures to northern Japan, where snow began falling Friday morning, with up to 50 cm expected in Hokkaido and Tohoku by Saturday evening, and a chance of blizzards.
News On Japan - Nov 24
It's Shichi-Go-San, the Japanese festival season for celebrating the healthy growth of children, with Aibo the robot dog giving prayer at a shrine in Fukuoka, on Friday.
NHK - Nov 24
Japanese police are investigating a stabbing incident that took place at a music arena in Yokohama City, south of Tokyo, on Thursday.
News On Japan - Nov 24
The amount of undeclared income by wealthy people in Japan has reached a record high of 98 billion yen, among the worst offenders being scrap gold wholesalers, breeders and yakiniku restaurants, the National Tax Agency announced on Friday.
Total Film - Nov 24
After hitting the big screen in its native Japan on November 3, Godzilla Minus One is about to make its way overseas – and it's a hit with international critics.
NHK - Nov 24
Tokyo has a new landmark, a 330-meter-high skyscraper that opened on Friday. The Mori JP tower has 64 floors for shops, offices and residences. It's the tallest building in Japan, a title that previously belonged to the Abeno Harukas commercial and business tower in Osaka, western Japan.
theceomagazine.com - Nov 24
Shitennō-ji temple is one of Osaka’s most important Buddhist temples. Built in the sixth century during the rule of Prince Shotoku, it has stood firm as the high-rises of the modern-day city have towered above it.
News On Japan - Nov 23
As street dance reaches fever pitch in the lead up to the 2024 Paris Olympics with the inclusion of breakdancing, one of Japan's largest street dance events was held in Yoyogi Park, Shibuya, Tokyo.
News On Japan - Nov 23
Russians continue to be the worst offenders among cars with foreign diplomatic number plates when it comes to not paying off parking fines in Japan.
News On Japan - Nov 23
As Kyoto's autumn foliage reaches its peak, swarms of tourists have converged on the ancient capital, captivated by stunning displays like Wednesday evening's illumination at Kiyomizu Temple.