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Japan Bourse Chief Expresses Concerns Over Weakened Yen and Diminishing Benefits

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Japan Bourse Chief Expresses Concerns Over Weakened Yen and Diminishing Benefits

Hiromi Yamaji, the chief executive officer of Japan Exchange Group Inc., has voiced concerns over the weakened yen and its diminishing benefits for Japanese stocks. While a drop in the currency is expected due to a widening interest rate gap, Yamaji highlights the negative economic side effects, such as an increase in the nation's import bill for energy items like oil. Additionally, the weakened yen is no longer a significant advantage for manufacturers, including automakers, who have global operations.

Yamaji emphasizes that other factors, such as the size of Japan's economy and markets, liquidity of its securities, and stable political and regulatory environment, contribute to the nation's shares reaching a three-decade high. He also believes that Japan is benefiting from a reallocation of global funds from China amid geopolitical tensions. Yamaji expresses confidence in Japan's ability to handle rising interest rates, as it signals stable inflation and the stock market's resilience.

However, Yamaji considers the current exchange rate as too weak for the Japanese yen. He acknowledges the need for capital improvement plans to raise market value for companies trading below book value. Yamaji believes that further progress is necessary to meet market expectations and sustain Japan's share rally. He also anticipates a drastic change in the market dynamics if Japanese retail investors increase their stock investments next year through the tax-exempt Nippon individual savings account program.

In conclusion, while concerns persist over the weakened yen and its diminishing benefits, Japan's stock market remains influenced by various factors. The nation's economic strength, market liquidity, and geopolitical factors contribute to its attractiveness for investors. However, addressing market expectations and encouraging retail investor participation will be crucial for sustaining Japan's share rally.

Implications of Japan's Weakened Yen for New Businesses

The concerns raised by Hiromi Yamaji, CEO of Japan Exchange Group Inc., regarding the weakened yen and its diminishing benefits for Japanese stocks, present a complex landscape for new businesses. For those in the manufacturing sector, the weakened yen's reduced advantage could necessitate a strategic shift. Companies with global operations may need to reassess their financial strategies to mitigate the impact of a weaker yen on their profitability.

Understanding Market Dynamics

Yamaji's emphasis on the size of Japan's economy, market liquidity, and a stable political and regulatory environment as key factors influencing the nation's shares is a crucial insight for new businesses. It underscores the importance of understanding market dynamics and geopolitical factors in business planning and decision-making.

Addressing Market Expectations

Yamaji's call for capital improvement plans to raise market value for companies trading below book value highlights the need for new businesses to meet market expectations. It's a reminder of the importance of strategic financial planning and the potential impact of investor perceptions on a company's market value.

In conclusion, while the weakened yen presents challenges, it also underscores the importance of understanding and responding to market dynamics. New businesses, particularly those with global operations, will need to navigate these complexities to achieve success in the Japanese market.

Story First Published at: https://financialpost.com/pmn/business-pmn/yens-too-weak-and-benefits-are-waning-japan-bourse-chief-says
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