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Stirs are keeping a very close eye on Japan no wonder look at the Nikkei 225 this is the good Japan version of the Dow Jones industrial shooting up.
To new highs although down today now.
Conversely the yen has dropped about 13%.
Against the dollar in the past three months it did rebound slightly today after Japan's finance minister denied a report.
Saying the Bank of Japan was considering purchasing foreign bonds forget all about it doesn't matter the fact is the trend is in place right now.
But are these signals to continue buying Japan.
Or maybe get in if you haven't or to stay far away.
Have a street fighter battling it out are bullish -- -- -- Chiapas circus on how he's wisdom tree chief investment strategist.
And weighing in as -- bear on Japan his column -- or camp financial group founder let's get to a gentlemen.
-- -- -- get you straight first you've got to Japan hedged equity fund DE XJ that has obviously done well.
One year it's up 19%.
Let's get right to -- -- on the bullish side why.
Well Japan's one of the equity markets in the world in fact that's one of the few where the equity market is negatively correlated to the currency market.
So -- the Japanese yen weakens.
It's not unusual to see the equity market rally because you have some of these large exporters to benefit from that which -- And right now the basic dynamic in the Japan as the people in control of that government.
Want to see the currency weakened and they're gonna continue to put pressure on the Bank of Japan to get those results so much you wanna fight the -- in Japan.
You probably want to hedge out there the currency impact of the Japanese equity exposure.
-- it sounds very rational and yet you're not buying into this what is your concern why are you bearish on Japan.
Well -- Worried about these forms of monetary policy because I worry that in essence it's putting the cart before the horse what the BOJ is really trying to do the Bank of Japan.
Is really trying to do -- they're trying to bid up stock prices.
Without actually impact in the underlying fundamentals of the stocks that make up in essence the corporations that make up the industry so I get concerned.
When I see these sorts of monetary policies.
Enacted that target what is really nominal wealth what is stock prices.
That doesn't necessarily have an impact on the underlying corporation -- Fighting I think -- -- column let me just play devil's advocate here are you fighting the so called Japanese spent the fact is.
The yen will continue at least in the short term to go lower does that not automatically mean a direct correlation inverse correlation to -- these higher stocks.
Yes I mean.
And Giles right you know that you've got this situation in Japan where there's the inverse correlation between the currency in the stock market -- you know we're ultimately all trying to devalue and so.
You know these sorts of policies can work in the currency markets in the short term but ultimately.
You've got the Fed.
You've got the BE CB you've got all the major central banks of the world trying to drive their currencies down so.
You know the yen making gold -- I think in the in the short term but ultimately you're you're fighting against you know not movable object here because here.
You're all the central banks can't drive down their currencies at the same time so I think there's limited to what's going on on.
Election on outlook the II I'm I'm with column on one point and that is that that you just don't know what it's eventually gonna happen that the yen could just.
Collapse at some point and then what does that really mean to equities there.
But anything could happen well I know is that since the Fed has been doing this -- US you know since march of 2009.
You've -- you see -- 100% movement in in US stocks.
So I I'm not arguing whether or not this is a good thing or bad thing.
-- saying as long as -- central banks are out there doing it he need to be mindful what is the impact on asset prices what is the impact on equity markets.
And when this kind of thing happens in Japan.
Japanese stocks react in a very unique way which.
They have I mean we just saw the Nikkei 225 but but -- on how does it is that the good money already made in.
Well the Nikkei fell hearing on the Nikkei peaked at 39000 in 1989 -- cut all the way down 80000 so.
People were looking 125%.
Rally of the last few months need to be mindful that this is an equity market that we know was down 75%.
From -- -- And over the last ten years if you -- underweight Japan that was a good strategy.
But now you're gonna period with -- Japanese equity market is beating -- and -- the S&P 500 and there's some risk to being underweight Japan.
Colin usually you will not invest.
In Japan if not there got to make somebody what's -- better by.
Yeah I just think that you know Japan is you know of that -- in them.
Good neighborhood really I mean it.
You're gonna invest you don't allocate money towards Asia I just think there's much better options -- you know ultimately the big thing that's troubling Japan over the long term.
Is really the demographic problems in these there's enormous headwinds that make Japan's future you know.
Really difficult in essence so.
I think if you're gonna move.
You know money towards the Asian economies is as much better choices -- that India is a great example of an economy would much better demographics.
You know much better long term trends in place that.
It just it makes it -- a better house in a good neighborhood is essentially what it comes down to.
Lucci on how do you do you have -- get out.
While the getting -- -- point is there any point that you're looking at where you say this may turn in this may reverse.
Well if you get to the point where the Bank of Japan wants to have its own policy independent prime minister.
And doesn't take its cue from the prime minister I think that's where you would get a reset -- these markets.
But until that happens.
I think you should you know make a distinction between what's happening the Japanese economy and what's happening in the Japanese equity market don't forget these are exporters tied to the global economy.
Come and you don't have to be bullish on Japanese economy to be bullish on the near term on Japanese.
Exactly what's happening here in the US is a bit -- you -- we've got a very tentative economy but our equity markets have looked absolutely in the pink over the past year.
My concern you just made the point -- are these are global exporters like this Sony's of the world but.
There's an informal boycott.
In in China of Japanese equities -- kind of informal but they're having this this dispute over an island somewhere I mean.
That does that concern you that there goes up market.
Well you know they've had a recession in Japan had three quarters and -- the economy is contracted.
But did the equity markets to look 25% of the last three months even with the problems with China.
So if you get any kind of reconciliation of stabilization on that point that I can potentially be a negative that gets removed from -- equation going forward.
Which -- says yes to Japan that column says no but yes to India are able have you guys back thank you so much for joining us switching out of -- -- out -- -- chief investment strategist you're welcome and Collin Roche.
Or camp financial group founder in port street fight bulls bears we love that closing.
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