Japan

Worth noting Tokyo core CPI YoY fell to 1.7%, down from 1.8%, and that monthly retail trade came in a touch stronger than expected at 1.2% MoM, ahead of consensus at 0.6%.

The below does a good job of summarising our thesis on Japan, namely that corporate profits are steadily rising, inflation is not out of hand, tourism is strong, and the overall net international investment position (claims on foreign assets minus foreigners’ claims on Japanese assets) is firmly positive.

So when the yen falls (as it has) those foreign assets become more valuable, and produce stronger income streams (which you can see in the BOP data). So yen weakness is not a problem, per se, in our view, and given our exposures are unhedged, if the situation reverses and the yen improves, whilst that might cause some headwinds to corporate profits, the FX gains should provide protection.

Maybe that is not a slam dunk “win win” situation, but it is a good equity diversifier.

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This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

Please note that past performance is not a reliable indicator of future performance.

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