Japanese stocks have soared to record highs amidst a surge in bearish positions on the yen, signaling investor caution over currency risks.
Asset managers, increasingly wary of yen fluctuations, have bolstered their bearish stance on the currency to the highest levels in over a year.
The correlation between yen positions and the Topix 100 index has intensified, reflecting a trend where currency bets turn bearish as major Japanese stocks climb.
The yen’s depreciation by 6% against the dollar this year defies expectations of a rebound, impacting returns for global investors in Japanese equities.
Despite forecasts, the weak yen persists due to expectations that the Bank of Japan won’t rush to further raise interest rates even if they initiate a hike for the first time since 2007.
Foreign demand for Japanese stocks remains robust, evidenced by the 52-week moving sum of net buying by overseas funds reaching ¥8.1 trillion ($54 billion), the highest since 2015.
This trend underscores the allure of Japanese equities amid optimism surrounding the end of deflation and a bullish outlook for the nation’s economy.
As Japanese stocks continue their upward trajectory, investors navigate currency risks with strategies such as hedging against yen depreciation.
The surge in bearish yen positions reflects a cautious yet optimistic sentiment prevailing within the Japanese stock market landscape.
