Dollar-Yen at 160 triggers intervention, seen as 'psychological bottleneck' for Japan consumers

追加: 2026-05-23

[00:00:00]You're watching the weakness in the yen, which is around 160 right now. We didn't It didn't hit that level this morning, but around that range. And you're thinking that maybe that's going to be a factor that sort of holds back Takaichi, a prime minister, and her government from going a little more aggressive on fiscal plans.

[00:00:24]Yeah, so obviously Sanaenomics, as they're calling it, is kind of a carbon copy of Evanomics with the three arrows.

[00:00:30]And one of that is accommodative monetary policy. And Takaichi-san was critical of the BOJ in the past when they were raising rates towards 50 basis points and before she became prime minister. That's why the yen dropped significantly after she was elected.

[00:00:44]However, since becoming prime minister, she's not backed off of those comments, but she hasn't been as vocal. And clearly she didn't interrupt or get in the way of the BOJ raising rates to 75 basis points in December. Now, the reason for this is while she wants a weaker yen to support the economy through the corporate sector and obviously the exporters, 160 yen is becoming kind of this bottleneck figure, a psychological bottleneck figure for Japanese households where it will impact consumption. And Takaichi-san, one of the things that may be going underreported is I think one of the things that she wants to do is maintain the dormant condition in which the nominal GDP, if it's higher than the nominal interest rates, the debt-to-GDP should shrink. And consumption is obviously a very important piece of that GDP. So, if the yen weakens beyond 160 and the consumption drops and it hurts the GDP, it hurts that narrative or that trend. And I think that's the reason why you keep seeing the BOJ and the Japanese government intervening at 160 yen. Now, the US also does not want the yen to drop below 160 yen. It's pretty clear from the coordinated rate checks that happened earlier this year and the fact that the intervention happened on April 29th when the Japanese market was closed and they used the New York market to do so, clearly is an indicator that both the US and Japan do not want the end of the week to be low 160, which is why you're seeing this kind of ceiling there.

[00:02:04]Mhm. I want to get your market close because if you really zoom out >> Yes. So, if you really zoom out from 2013, I mean Japan sort of like, you know, hit the runway and then new codes come out, corporate corporate reform measures, Japan's a value up mantra and it really ran hard. And then now it feels like it could stall a little bit and many are questioning am I too late?

[00:02:29]Like is this too late for me to deploy fresh capital into the Japanese equities markets? What do you say?

[00:02:37]Mhm.

[00:02:39]I think that there's still plenty of room to go. I think that the main reason why Japan became so in vogue in 2023 was because Warren Buffett came and put a spotlight on the fact that shareholder returns had tripled basically since the end of Abenomics. Basically in 2015, 2016 range, most foreign investors decided Abenomics was a failure because we hadn't hit the inflation targets or the GDP targets and they essentially left the market, right? It's probably only a few percent of most people's benchmarks, so it's perfectly natural to expect uh investors to throw maybe a new natural kind of benchmark weight into an ETF and set it and forget it. But the shareholder returns went from about 15 trillion yen at the end in 2015, excuse me, to about 30 trillion yen by 2023 when Warren Buffett came. And I think one of the interesting things was if Buffett says don't invest in ABC companies, right? Don't invest in arrogant, bureaucratic, complacent companies. Arrogance is in the eye of the beholder, but Japanese companies historically have been very bureaucratic, very complacent. I think the message that was sent out was if Warren Buffett can see that things are changing, this time might be different then maybe we should invest and that's what's led to the significant flows since 2023. Now today the shareholder returns hit over 40 trillion yen last year.

[00:03:54]And if you look at the amount of cash on balance sheets, it's higher than where we were in 2015, which means the capacity for companies to continue to increase their shareholder returns is larger today than it was 10 years ago.

[00:04:05]So, we fully believe that these trends will continue. And while it's lost its teeth as a market catalyst, the fact that it will continue to improve the fundamentals should mean that those fundamental improvements will be met with share price appreciation down the line.

[00:04:20]What kind of approach are you taking right now, Andrew? Do you go for sector-level approach? Do you think it's sort of more active a stock picking is going to work out better in Japan? And if I may add one more question to that, it it do you think there is more room to run for a large-cap names or is it the right time to venture into some of some of the smaller mid-cap size companies in Japan?

[00:04:50]Yeah, that's a great question. Um I think one thing is as one of if not the largest Japanese asset manager, we have obviously a full lineup of different types of funds and things, but our flagship product is a quality value approach. Um and if I were to offer a couple areas that they are interested in right now, obviously AI is something that you can get exposure through semiconductors and things, but the team is now trading into what they call physical AI, which is basically factory automation and robotics. The bet is if President Trump is successful in his America first policies to bring back manufacturing to the United States.

[00:05:25]One thing sadly for him, I think is that it's not going to be on the back of American labor or manpower. It's going to be on the back of AI and factory automation. And many of these Japanese companies have entered partnerships with Nvidia to try to improve the efficiency of uh assembly lines and things. So, that's an area that's quite interesting from the quality side of the aisle. From the valuation part, uh I think the recent sell-off in autos has made the auto sector quite attractive from a valuation perspective. You need to be selective, obviously, because of the different market exposures and things. And I think Toyota is quite interesting from the fact that there's a really strong push for hybrids in the United States, and Toyota has, unlike other OEMs, invested fairly balanced in EVs, hybrids, and in ice vehicles. And therefore, in the next market, sorry, the model cycle, we think that Toyota might be able to gain some market share. So, some of the names in the auto sector are looking quite attractively valued today.

[00:06:21]And so, yeah, those are two areas that we think are quite interesting.