© Archyde.com. The day when ‘solving money for 10 years’ stopped… “Pay attention to Tokyo Gas, Japan Airlines, ABC Mart”
The financial market is shaking as the Bank of Japan (BOJ) prepares to withdraw from the ‘money release’ policy that has continued for nearly 10 years. On the 20th, the Bank of Japan kept the short-term interest rate at -0.1% per year and the long-term interest rate at 0%, but expanded the range of long-term interest rate fluctuations from ±0.25% to ±0.50%. The expansion of this volatility by the Bank of Japan, which controls long-term interest rates by buying and selling government bonds in the market, is accepted as a “de facto interest rate hike” (Nihon Keizai Shimbun).
This is a partial revision of the large-scale monetary easing policy that has been adhered to since 2013, when Governor Haruhiko Kuroda took office. It is a ‘surprise announcement’ that even the Japanese people did not expect. Matsuzawa Naka, chief strategist at Nomura Securities, said, “Easy policy is practically coming to an end.” Enlarge image “Prospect for gradual strengthening of the value of the yen” There is a prospect that the value of the yen, which fell to the lowest level in 32 years two months ago, will gradually turn to strength in the new year. If Japan, which was the only developed country to keep interest rates low alone, narrows the interest rate gap with the US, it will be a factor in raising the value of the yen. The company’s performance is also expected to be mixed.
Korea Investment & Securities cited banks, power and gas companies, paper companies, and airlines as beneficiaries of the strong yen. Shares of Japan’s three major financial groups are already bouncing through boring box ranges. On the Tokyo Stock Exchange, shares of Mitsubishi UFJ Financial Group soared 9.7% over the three days since the 20th. During the same period, Sumitomo Mitsui Financial Group rose 7.5% and Mizuho Financial Group rose 4.2%. Tokyo Gas, Kansai Electric Power, and Nippon Paper, which have been weighed down by rising import costs, are also mentioned as potential beneficiaries.
A strong yen is also expected to work as a boon for food companies such as Asahi Group Holdings, Kirin Holdings and Nissan Flour Mills Group. ABC Mart, a shoe seller with a lot of overseas production and imports, and Nitori Holdings, a furniture seller, are also considered promising companies.
Japan Airport Building, East Japan Railway Company, and Isetan Mitsukoshi, whose performance improves as the number of foreign tourists increases, are also expected to improve their performance. In October, Japan allowed visa-free entry to 68 countries, including South Korea. The number of foreigners entering Japan in November was 934,500, up 90% from a month ago. Choi Bo-won, a researcher at Korea Investment & Securities, said, “Japan’s third quarter growth rate was below expectations, but offline consumption is increasing significantly due to travel support policies.” How to invest in ETFs containing Japanese companies If you find it burdensome to invest directly in the Japanese stock market, there is also a way to invest indirectly using domestic exchange-traded funds (ETFs). A typical example is the ‘TIGER Japan Nikkei 225’, in which returns are determined by the movement of the Nikkei 225 Index. Another domestic listed ETF, ‘TIGER Japanese Yen Futures Special Asset’, is a product that mainly invests in won and yen futures of the Korea Exchange. It is explained that it can be used at a time when the value of the yen is rising rapidly.
Various Japan-related ETFs are also traded on the US stock market. Researcher Choi said, “ETFs that are not hedged against currency are more attractive during times when the pressure to strengthen the yen is increasing.”
The iShares MSCI Japan ETF, which tracks the MSCI Japan Index, recorded a return of 5.7% over the past three months. ‘JP Morgan Beta Builders Japan ETF’, ‘Wisdom Tree Japan Hedged Equity Fund’ and ‘Franklin FTSE Japan ETF’ also showed returns of 4-5% for three months. “Unexpected policy shift… The prevailing view is that the increase in the value of the yen will occur at a gradual pace, not breathlessly. Jeon Gyu-yeon, a researcher at Hana Securities, said, “Just as Governor Kuroda cautioned against broad interpretation as ‘rising interest rates’, the process of normalizing monetary policy by the Bank of Japan is highly likely to take place gradually over a long period of time, considering the aftermath of the economy and financial markets.”
Experts advised that it should be noted that uncertainty over the Bank of Japan’s monetary policy has increased until a new governor takes office. Governor Kuroda presides over financial policy decision meetings in January and March next year, and will retire in April. However, there is no disagreement that the yen’s rebound is becoming a ‘trend’ as long as the preliminary suspension work to get out of the ultra-low interest rate policy has begun.
Researcher Choi said, “Until early next year, the Japanese exchange rate and stock price volatility may increase depending on macro indicators and corporate performance announcements in the US and Europe.” I predicted.
Reporter Lim Hyun-woo tardis@hankyung.com
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