Yen keeps going from strength to strength!

[ChapInTokyo]

My take is that BOJ is prepared to buy bond to keep the rates hike on an even keel. After all, closing the US-Japan rate gap too quickly might hurt the economy from a too strong a yen. Makes sense to me. Steady as she goes...

The yen has already strengthened by more than 5% since the end of last year. I think that the BOJ is trying to stave off potential criticism of currency manipulation from Trumpland while keeping interest rates manageable for Japanese industry and government, and the exchange rates from reprising the disastrous scenario of those Plaza Accord years.

[ChapInTokyo]

The yen is currently at 142.61 yen to the dollar…

In practice, that’s enough to wipe out the 5.31% gain of the AWCI index (=the index used by eMaxis Slim All Country) over the past year.




According to the news reports of the US-Japan tariffs negotiations today, it seems that a strong yen is not one of the negotiation bullet points brought up by Trump and Bessent, so hopefully the yen won’t strengthen the way it did after the Plaza Accords, but definitely something to keep an eye on I think.

[beanhead]

but definitely something to keep an eye on I think.

Nothing I can do about yen/dollar rates or what Trump and his cronies do.
So I will do nothing.

[ChapInTokyo]

but definitely something to keep an eye on I think.

Nothing I can do about yen/dollar rates or what Trump and his cronies do.
So I will do nothing.

Give you a clue. Home country bias.

[Tkydon]

Yes, finally the title of the Thread is correct. The Yen is indeed going from Strength to Strength...
Overseas Asset Buying Opportunity?

[TokyoWart]

Yes, finally the title of the Thread is correct. The Yen is indeed going from Strength to Strength...
Overseas Asset Buying Opportunity?

The purchasing power parity exchange rate for the yen to US dollar is currently something around 94 yen/ $1. That is close to historical lows.

[sutebayashi]

The purchasing power parity exchange rate for the yen to US dollar is currently something around 94 yen/ $1. That is close to historical lows.

Does it revert to the mean by inflation in Japan staying high, or by the yen strengthening (or something else)?

Outside my investments, I am up to my eyeballs in dollars now, to my detriment this April, but I earn a yen income so hopefully I'll be good however things fall.

[Tkydon]

The purchasing power parity exchange rate for the yen to US dollar is currently something around 94 yen/ $1. That is close to historical lows.

Does it revert to the mean by inflation in Japan staying high, or by the yen strengthening (or something else)?

Outside my investments, I am up to my eyeballs in dollars now, to my detriment this April, but I earn a yen income so hopefully I'll be good however things fall.

If the Yen strengthened to the level it was at even just before the COVID Crisis began, that would lead to not just Dis-Inflation but Deflation as imports would become 20-30% cheaper... The biggest imports of course being energy and food.

It would also make overseas assets 20-30% cheaper for young investors in the accumulation phase of their investment careers purchasing overseas assets in their iDeCo and NISA retirement funds.

Of course it would reduce the value in Yen terms of overseas assets you already own, even if the asset prices were increasing in their native currencies, unless they are owned in Exchange Rate Hedged vehicles...

It would also reduce the value of stocks of Japanese Corporations that have a significant proportion of their revenues generated overseas, as the Yen value of the overseas revenues would be cut by 20-30%, and increase the cost to overseas buyers of Japanese Exports by 20-30%, as their currencies will not buy so many Yen as now.

It may also cause a sell-off and decline in the Japanese Real-Estate Market, as foreign investors who bought real-estate very cheaply when $1 would buy Y160-165, realize a large gain in foreign currency terms; Foreign Exchange Gain and Foreign Investor Demand induced Gain in the value of their properties, and wish to take their profits, but their Yen Rental Income will be increasing...

The Exchange Rate is a Double-Edged sword. Someone will win and someone will lose...

[Hanimal]

Give you a clue. Home country bias.

Seasoned investors understand this basic rule.

I have heard of unsophisticated investors maxing out their NISAs on January 4th with S and P funds after following advice from clowns on the Internet. 160 yen the dollar with overpriced US stocks. I wonder how that is working out for them.

Another consideration is that traditionally the yen strengthens when there is a global recession. So more fun to come!

[RetireJapan]

Another consideration is that traditionally the yen strengthens when there is a global recession. So more fun to come!

I'm expecting (at some point) a 40% drop in the global stock market along with the yen strengthening to 100 or so, meaning a temporary 60% drop in our net worth.

For me that is a realistic worst case scenario, and I hope I will be okay with it.

But people need to be thinking in those terms if they want to invest.