RetireJapan wrote: ↑Mon Apr 21, 2025 1:03 amI'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.
As my mother used to say...
Did you get up on the wrong side of the bed this morning?
RetireJapan wrote: ↑Mon Apr 21, 2025 1:03 am
I'm expecting (at some point) the yen strengthening to 100 or so.
I have been in Japan a while. I have it ingrained in my brain that the yen should be around 110 to the dollar. Whether it ever gets to that point again, we will see.
RetireJapan wrote: ↑Mon Apr 21, 2025 1:03 am
I'm expecting (at some point) the yen strengthening to 100 or so.
I have been in Japan a while. I have it ingrained in my brain that the yen should be around 110 to the dollar. Whether it ever gets to that point again, we will see.
Great if you hold Yen and Yen denominated Assets.
Not Great if you hold Dollars and Dollar denominated assets, even if they're in a Yen denominated Fund...
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This Guide to Japanese Taxes, English and Japanese Tai-Yaku 対訳, is now a little dated:
Tkydon wrote: ↑Tue Apr 22, 2025 8:13 am
Great if you hold Yen and Yen denominated Assets.
Not Great if you hold Dollars and Dollar denominated assets, even if they're in a Yen denominated Fund...
It’s a bit of a too simplistic view to be honest. Toyota Motor 7203 is denominated in yen but a strengthening yen hurts their profits and stock price. This is true for many Japanese companies who export their domestic production.
Proctor & Gamble is denominated in USD but derives 65% of their revenue from outside the US. A falling USD makes their sales in non-USD currencies worth more in dollars.
It’s fairly meaningless what currency a listing is denominated in. Indeed many Japanese companies have dual listings - both a TSE listing in JPY and an ADR in USD. They move in tandem regardless of denomination.
Tkydon wrote: ↑Tue Apr 22, 2025 8:13 am
Great if you hold Yen and Yen denominated Assets.
Not Great if you hold Dollars and Dollar denominated assets, even if they're in a Yen denominated Fund...
It’s a bit of a too simplistic view to be honest. Toyota Motor 7203 is denominated in yen but a strengthening yen hurts their profits and stock price. This is true for many Japanese companies who export their domestic production.
Proctor & Gamble is denominated in USD but derives 65% of their revenue from outside the US. A falling USD makes their sales in non-USD currencies worth more in dollars.
It’s fairly meaningless what currency a listing is denominated in. Indeed many Japanese companies have dual listings - both a TSE listing in JPY and an ADR in USD. They move in tandem regardless of denomination.
In general terms, I agree with your point that many large corporations are doing business internationally and so a strong currency cuts both ways.
But for a retiree, allocating a good chunk of the portfolio to Japanese companies paying dividends in yen, and with strong financials to continue doing so while stock prices may decline certainly gives me some peace of mind. If things get really sticky, many companies will cut their dividends, but cash rich Japanese companies are in a good position to continue paying dividends even in hard times.
Of course it will help to have a good number of defensive stocks which actually might benefit from a strong yen too.
ChapInTokyo wrote:
But for a retiree, allocating a good chunk of the portfolio to Japanese companies paying dividends in yen, and with strong financials to continue doing so while stock prices may decline certainly gives me some peace of mind.
Japanese equity market is pretty geared to global growth. If you expect a recession it is one of the last places I would think of allocating to. It is rammed through with companies with highly cyclical earnings - auto, hardware tech, financials, heavy industry, automation/robotics....
ChapInTokyo wrote:
But for a retiree, allocating a good chunk of the portfolio to Japanese companies paying dividends in yen, and with strong financials to continue doing so while stock prices may decline certainly gives me some peace of mind.
Japanese equity market is pretty geared to global growth. If you expect a recession it is one of the last places I would think of allocating to. It is rammed through with companies with highly cyclical earnings - auto, hardware tech, financials, heavy industry, automation/robotics....
That's true. But that's the definition of cyclical sectors isn't it.
In case we are going to go into recession, I am increasing my non-equity allocation at the moment. Thankfully I had already lowered my US tech exposure last year.
As for the Japanese equity market, it also has it's own defensive stocks as well as companies like Suzuki which has zero reliance on the US market, so those are chugging along nicely. Even the hardware tech etc companies like Tokyo Electron and so on will have a tough few years but they will continue to pay dividends in yen which is somewhat nicer than a dollar dividend with a strengthening yen.
ChapInTokyo wrote: ↑Thu Apr 17, 2025 1:35 pm
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!
Many people had taxable investments they simply sold and re-bought once the 2025 NISA tranche opened. That is a pretty agnostic move.
Regardless, lump summing early in January is the right move statistically speaking.
However, I think the passive investment company has been hammering international diversification for decades now, so hopefully most are not 100% S&P. At least in Japan "オルカン" seems just as popular.
