Strong yen brings down Japan Inc’s high-flying success
The resurgence of the yen has brought Japanese stocks crashing back to earth, leaving investors scrambling to gauge the potentially diminished outlook for earnings.
In just three trading sessions, the Nikkei share average (NI225) has lost a fifth of its value. It tumbled, marking its second-largest decline on record and its biggest since the Black Monday crash of October 1987. This sell-off is partly driven by the recent turnaround in the yen (USDJPY) after the Bank of Japan began to raise rates for the first time in decades, most recently last week.
Now, investors must size up Japan Inc’s prospects without the extra cushion from the currency, which has helped many heavyweight exporters. Until a few days ago, the Japanese stock market was seen as a global standout, having gained almost 30% last year and touching a lifetime high last month.
Read more to find out how Japanese yen could affect the Japan Inc’s here.
Disclaimer:
The market turmoil may have a silver lining for investors who look beyond a group of Japan’s export champions. The yen’s reversal could offer relief to the broader economy after its months-long decline has pushed up consumer prices, raising deep concerns about the outlook for spending in Japan. Traders should stay vigilant, sticking to a trading strategy and managing risks at a healthy level.
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