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.
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