{"id":42782,"date":"2023-07-31T19:47:12","date_gmt":"2023-07-31T23:47:12","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/bank-of-japans-shift-helps-japanese-stocks-what-it-means-for-the-u-s\/"},"modified":"2023-07-31T19:47:14","modified_gmt":"2023-07-31T23:47:14","slug":"bank-of-japans-shift-helps-japanese-stocks-what-it-means-for-the-u-s","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=42782","title":{"rendered":"Bank of Japan’s Shift Helps Japanese Stocks. What It Means for the U.S."},"content":{"rendered":"
\n
<\/p>\n
<\/p>\n<\/figure><\/div>\n

The
\n Bank of Japan
\n \u2018s recent signal it is moving toward a tighter monetary stance is good news for Japanese stocks\u2014but not for U.S. stocks and bonds. <\/p>\n

For seven years, the BOJ had held rates between 0 and 0.5%, scooping up Japanese government bonds and engaging in yield curve control to keep a lid on interest rates. A couple months ago, the central bank hinted it could start moving away from its old approach as the country sees the first glimmers of inflation in decades. <\/p>\n

\n

It made it clear last week a change is forthcoming. While the BOJ held its short-term interest rate target at 0.1%, it changed its closely parsed language to signal it is taking a more flexible approach. The central bank moved the trading range for the benchmark 10-year bonds from plus or minus 0.5% to plus or minus 1%.<\/p>\n

For global markets, the message was the BOJ was no longer willing to act as a buffer, keeping a lid on rates and injecting cash into the economy. It also wasn\u2019t going to wait for higher inflation to start moving in the direction of higher rates.<\/p>\n

For Japanese savers, pension funds, and insurers, that means staying close to home suddenly looks much more attractive than buying U.S. Treasury bonds, hedged or unhedged, given the potential for currency fluctuations. While some may opt for Japanese bonds that are now paying positive returns, longer term investors may favor Japanese stocks with a 2.5% and rising dividend yield, keeping the recent rally in Japanese stocks going, says Udith Sikand, analyst at Gavekal Research.<\/p>\n

The
\n iShares MSCI Japan ETF
\n (ticker: EWJ) is up 16% so far this year and analysts see further gains for Japanese stocks. While Japan\u2019s move away from subzero interest rates will make the currency a less attractive short for investors, the yen is still undervalued and it could take a couple of years to get back to fair value, says Marc Chandler, managing director for Bannockburn Global Forex. That is another plus, Chandler says, for Japanese stocks.<\/p>\n

\n Bank of America\u2019s<\/span>
\n \u00a0<\/strong>Masashi\u00a0<\/strong>Akutsu writes he favors domestic demand-led stocks, which are generating stronger earnings than exporters, and should benefit from expectations the economy gets a boost from the summer holiday season and rising wages.<\/p>\n

Among the bigger domestically oriented stocks with resilient earnings expectations that Akutsu highlights are
\n Mitsubishi UFJ Financial Group
\n (8306. Japan), theme park and tourism company Oriental Land (OLCLY), insurer
\n Tokio Marine Holdings
\n (8766. Japan), and furniture retailer Nitori Holdings (NCLTY)<\/p>\n

Who stands to lose? U.S. assets, cautions Apollo Group Chief Economist Torsten Sl\u00f8k. <\/p>\n

\u201cJapanese investors own a lot of U.S. credit. So when Japanese investors over the coming months will be selling U.S. credit and buying Japanese Government Bonds, it will make borrowing more expensive for U.S. firms in credit market,\u201d Sl\u00f8k tells Barron\u2019s.<\/em> And increased borrowing costs, he adds, could be a problem for U.S. stock markets, which are up 20% so far this year. <\/p>\n

Yet to be seen is how quickly Japanese long-term investors, who have been big buyers of U.S. and other global bonds, will adjust their portfolios in response to more attractive options at home.<\/p>\n

Write to Reshma Kapadia at reshma.kapadia@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The Bank of Japan \u2018s recent signal it is moving toward a tighter monetary stance is good news for Japanese stocks\u2014but not for U.S. stocks and bonds. For seven years, the BOJ had held rates between 0 and 0.5%, scooping up Japanese government bonds and engaging in yield curve control to keep a lid on […]<\/p>\n","protected":false},"author":1,"featured_media":42783,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-42782","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nBank of Japan's Shift Helps Japanese Stocks. 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