The Japanese economy as a whole remains somewhat subdued, not least overshadowed by slower growth in China.
Despite a protracted period of low-level inflation, the Bank of Japan has been slow to raise interest rates in case this causes deflation to return.
As months go by and some domestic wage growth is seen, it seems more likely that the BoJ will raise rates, which, if nothing else, will reduce the selling pressure on the yen.
A higher valued yen could then undue some of the gains mentioned above.
There seems to be a case then to invest in the export sectors where Japan has leading global businesses, and the domestic stocks, mainly smaller companies, where very low price to book ratios still offer compelling value.
The yen story may be cyclical, but the corporate governance changes are likely to be a structural positive for the asset class.
And the yen? Personally I would not bother to hedge at these levels. For those who have few investments in Japan, the low yen allows them to invest with sterling, which has risen against the yen.
From my own point of view, I would also take advantage of the lower yen by taking another holiday there while it’s a more affordable destination.
Simon Edelsten was a global equity fund manager for 40 years
