Japan’s economy is experiencing a period of growth and revival, with the Japanese stock market benefiting from the decline in the yen and the country’s “decoupling” from China. The Bank of Japan recently shifted away from its negative interest rate policy, which had been in place for 17 years, and the yen experienced a further decline instead of appreciating. This decline in the yen has had a positive impact on Japan’s export sectors, leading to a surge in the stock market.
The BOJ’s decision to end its negative interest rate policy aligned with market expectations. BOJ Governor Kazuo Ueda stated that the bank had met its 2 percent inflation target and noted the emergence of a positive feedback loop between wages and prices. However, despite the rate increase, the yen weakened against the dollar. Market analysts suggest that this is due to the substantial interest rate gap between the United States and Japan, which creates opportunities for yen-selling and dollar-buying.
The falling yen has benefited Japan’s export-driven industries, particularly automotive, and has led to significant gains in the stock market. Major Japanese corporations are projected to generate close to 2 trillion yen in profits due to the yen’s decline. Despite higher costs for import-dependent industries, the overall market trend is upward, leading to substantial wage increases by Japanese firms.
The devaluation of the yen has also attracted foreign investment into Japan’s stock market. Japanese assets are effectively discounted, making them more appealing to foreign investors. This influx of investment further contributes to the growth of the stock market.
The resurgence of Japan’s economy and stock market can also be attributed to geopolitical tensions and a shift towards “decoupling” from China’s industrial chains. The West’s strategic pivot towards encircling the Chinese Communist Party (CCP) and decoupling from China has positioned Japan as a principal beneficiary of these global changes. The United States and its allies have backed Japan’s resurgence as a semiconductor superpower, allowing for the yen’s depreciation and supporting Japan’s semiconductor industry.
Japan’s role in the semiconductor industry has a long history, and despite trade disputes in the past, the country has maintained a pivotal position in semiconductor materials and precision machinery. The establishment of a new semiconductor plant by Japan Advanced Semiconductor Manufacturing Company (JASM) and the collaboration with Taiwan’s chip giant TSMC highlight Japan’s commitment to reclaiming its leadership in this critical sector.
Overall, Japan’s stock market is benefiting from the decline in the yen and the country’s strategic positioning amidst global changes. The falling yen has boosted export-driven industries and attracted foreign investment, while Japan’s role in the semiconductor industry is being revitalized. With the potential for continued growth and a positive economic outlook, Japan’s stock market could reach new milestones in the future.
