Yen Weakens To July 2024 Lows, But Japanese Stocks Have Never Been Stronger

Benzinga_recent_news01-14

A well-worn market dynamic is resurfacing in Japan, as a weakening yen once again coincides with a powerful rally in domestic equities. As the Japanese yen slides to its lowest level since July 2024, ...

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Futures on the Nikkei 225 rallied 3.1% to close at fresh record highs, extending a rally that has been fueled by exporters and financials benefiting from the softer currency. \nToyota Motor Co. (NYSE:TM), the largest Nikkei component, surged more than 7% in Tokyo trading. Mitsubishi UFJ Financial Group Inc. (NYSE:MUFG), the second-largest holding, gained over 5%.\nSince the start of the year, the iShares MSCI Japan ETF (NYSE:EWJ) rose nearly 5%, easily beating the SPDR S&P 500 ETF Trust (NYSE:SPY), which gained about 1.6%.\nIs this currency-stock split sustainable? Some experts warn that the mix looks uncomfortable.\nEconomist Mohamed El-Erian highlighted that Japan is experiencing a historically unusual combination for a G7 economy: persistent yen weakness alongside rising bond yields—a dynamic he described as \"worrisome\" if it continues.\nAdam Turnquist, analyst at LPL Financial, tied the yen's slide directly to election chatter.\n\"The yen has fallen to its weakest level against the greenback since last January amid speculation that Prime Minister Sanae Takaichi may call a snap election,\" said Turnquist.\nTurnquist added markets welcomed the prime minister's pro-growth agenda, even as bonds and the yen struggled since she took office in October. He noted Takaichi favors easier policy while the Bank of Japan raises rates to fight inflation.\nThat tension matters. As Turnquist highlighted, Japanese authorities stepped in four times in 2024 when the yen weakened toward the 160 area, putting that zone firmly back on traders' radar.\nSpeculative positioning adds another wrinkle. Turnquist said long yen positions dropped to their lowest since early 2025, while shorts remain elevated, raising the risk of a sharp reversal if momentum breaks.\nHow far can the yen fall before officials act? Bank of America sees election risk as a near-term driver.\n\"The potential snap election is likely to become a short-term theme in the yen asset market,\" said Shusuke Yamada, analyst at Bank of America. \nIn the short run, markets appear to be pricing in what some have dubbed \"Sanaenomics\": looser fiscal policy, accommodative monetary conditions, a steeper yield curve—and a weaker yen. \n“The market may see further yen weakness and curve steepening unless the report is denied by the administration,” Yamada said.\nIn the analyst’s view, intervention becomes more likely in the 162–165 range unless yen selling accelerates sharply over a short period.\nLonger term, the picture stays murky. The administration has shown pragmatism, balancing growth goals with market stability. Aggressive deficit spending, however, could renew selling pressure on the yen and Japanese government bonds.\n“The medium- to long-term impact on the market remains uncertain at this stage,” Yamada said. \nPhoto Courtesy: FreelySky on Shutterstock.com","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0,"need_auth":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"tenantId":"TBGLOBAL","deviceId":"web-server-community-laohu8-v3","version":"4.36.0","shortVersion":"4.36.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2603630476","isCrawlerRequest":true}