How Investors Benefit From Yen Crash & Stocks Rally

Tokyo in the Sunlight

The prospects for Japan’s economy are comparatively stable.

(Photo: IMAGO/Kyodo News)

Frankfurt Investors in Japan are currently experiencing in an exemplary manner how much success on the stock market depends on the ups and downs of a currency. Since the beginning of the pandemic, the broad Japanese stock index Topix has gained around 20 percent in yen terms – but has lost around seven percent in US dollars.

The reason for the mismatch is the dramatic weakness of the yen. Since the beginning of the year, it has lost around 17 percent against the US dollar and around nine percent against the euro.

The most important reason for this is the monetary policy strategy of the Bank of Japan. Unlike other central banks around the world, it has so far stuck to extremely low interest rates, which has put the yen under pressure because investors in other currency areas are generating higher returns. For the new year, however, some experts are optimistic for both the yen and the Japanese stock market.

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