The yen is too weak and its benefits for Japanese stocks are diminishing while negative economic side effects are starting to show, according to the chief of the nation’s stock exchanges.
While it’s natural for the currency to drop given a widening interest rate gap between Japan and the rest of the world, the depreciation is pushing up the nation’s import bill, notably for key energy items such as oil, said Hiromi Yamaji, chief executive officer of Japan Exchange Group. At the same time, it’s no longer such a big tailwind for manufacturers like automakers, which have factories all around the world, he said.
Rather than just the cheap yen, Yamaji points to the size of the Japan’s economy and markets, the liquidity of its securities and the stable political and regulatory environment as other key reasons for the nation’s shares touching a three-decade high this year. In his view, Japan is also benefiting from a reallocation of global funds from China amid geopolitical stresses ranging from the future of Taiwan to technology transfer in the semiconductor industry.