Right. I am still confused about a particular issue related to Japanese investment. Lets assume we are correct and that the Japanese Yen will rise in value.
Stir Crazy. I do not understand what you are saying. The Yen will strengthen in value against the dollar and sterling as it and the Euro are being held instead. Apart from gold. Watch £ tank today with the .25% MPC rate decision. The Japanese currency is undervalued, their market trades on a p/e of 15 times. If you buy yen based investments that strenghtens relative to the euro and the share prices goes up too then this is positive, is it not, or am I missing something. If I am, the currency swing will not be greater than the equity swing.
Let's look simply at the Sterling v Euro in last 3 months, as the Euro strengthened in the intervening period.
£10,000 at [inverse £0.66 to €1] = €15,151,51
€15,151,51 [inverse £.724 to €1] = £10,969.69
Does the same rules not apply when swapping euro into a stronger suited currency and then cashing back at a later date?
I'm not sure. Maybe it will. After all, japan is heavily dependent on exports to the US so a stonger yen means Japanese goods are more expensive resulting in possibly lower share prices. However, China is now Japan's biggest export market
The percentage breakdown of Japanese exports for the four regions are as follows for 1997 and 2007 [JP Morgan]
EU 19% - 1997 16% - 2007
Asia 45% - 1997 49% - 2007
US 29% - 1997 21% - 2007
China 7% - 1997 19% - 2007
The dollar will rise in value during 2008 against other currencies to compensate the rise in Yen according to Henry Paulson and his advisors, futures are building this way too. Finally BRIC is a much more lucrative market to Japan than US but never write off America, it has a habit of biting back when least expected.