Does it make sense to continue with the same strategy with this JPY/USD rate?

[alberto]

I assume the most common strategy here is to buy an MSCI World, but does it make sense to continue with that strategy at this moment when the JPY/USD rate is about 25% higher than only a few months ago? Buying now means paying a big overprice if we assume the JPY/USD will eventually return to something more historically average. In this current situation, does it make sense to change the strategy towards hedged funds/ETFs or even Japanese stocks?

[RetireJapan]

I'm just sticking to the plan. Can't assume exchange rates will return to 110, don't know what's going to happen, or when.

[alberto]

Can I ask you what you think will happen to the JPY/USD exchange rate? It all depends on that. We are at the highest point in the last 30 years.

[sutebayashi]

Can I ask you what you think will happen to the JPY/USD exchange rate? It all depends on that. We are at the highest point in the last 30 years.

I think the yen is not going to suddenly reverse course and become sustainably stronger against the dollar again soon, without something big happening that would make us notice. Big policy change for example.

But if the yen does strengthen, that will mean you can buy more foreign assets than otherwise. Embrace that feeling

The yen is also very weak versus gold now. I am not selling my gold.

The yen might depreciate a significant amount still further before it appreciates a significant amount… also, what if the yen were to increase by 20%, but foreign stocks double?

But, I know where you are coming from. Just, if you want to speculate on the currency, why not set aside a small amount of money for that, and give it a go. (I do that myself, but have made money selling yen, not buying it.)

[alberto]

Thank you for your answer, very interesting thoughts. No, speculating on the currency in the short term is the last thing I want to do. But as I said, this is the highest point in the last 30 years. I invest for the long term and I usually keep my stocks for more than 10 years, so I don't really care if the yen will weaken more in the next 1-2 years, but if I have to say what will likely happen in the next 10-20 years, I would say that the yen will strengthen compare to this exact moment. And I believe mostly everyone here agrees. Then if you think that, buying unhedged foreign stocks with JPY means to lose about 20% or more. Maybe in the very long term is not so much, but I don't see much sense in choosing to keep buying USD at this price at this moment. It's true that everything is simpler if you just say "I don't know what will happen, I just don't want to change anything". That's usually a good strategy, but now the most likely result is very clear to me. I see that the JPY will strengthen in the long term as clearly as the funds we are buying will go up in the long term. So I don't see much sense in choosing something for the 2nd and the opposite for the 1st.

[RetireJapan]

Can I ask you what you think will happen to the JPY/USD exchange rate? It all depends on that. We are at the highest point in the last 30 years.

I have no idea, and neither does anyone else

[alberto]

Yes, but you could answer the same thing to the question about what the index fund you're currently buying will do in the future. However, your action about it is to invest on it, and that's because actually you believe that it will go up. That was my question: what you believe. The only difference I see is that you choose acting in the 1st case (investing because you believe it will go up), but you choose not acting in the 2nd case (keep buying USD with JPY despite you believe the JPY will strengthen, ...if that's the case, and that's why I made the case that now we're in the weakest point in 30 years, and we are here to invest for the long term).

[sutebayashi]

I would say that the yen will strengthen compare to this exact moment. And I believe mostly everyone here agrees.

There will surely be some times of strength, but generally speaking I am not in that camp, personally. At least not without some kind of catalyst to change the direction.

Often currencies do revert to the mean, but not always.

Of course forex is relative, so the US might ruin its dollar faster than the yen - this is a possibility I should be awake to.

[zeroshiki]

OP, you seem to have convinced yourself that you want to time the market. God speed to you on that and I hope you're actually right. You seem to want validation on that but most regulars on this forum recognize that we don't know anything since we don't work for the Fed or the BOJ.
The JPY is indeed doing very poorly right now and I *hope* it goes back up but I have absolutely no proof of that and am unwilling to put any money on it so I will just do what I've always been doing and buying all world funds and hoping the stocks keep going up.

[alberto]

OP, you seem to have convinced yourself that you want to time the market. God speed to you on that and I hope you're actually right. You seem to want validation on that but most regulars on this forum recognize that we don't know anything since we don't work for the Fed or the BOJ.
The JPY is indeed doing very poorly right now and I *hope* it goes back up but I have absolutely no proof of that and am unwilling to put any money on it so I will just do what I've always been doing and buying all world funds and hoping the stocks keep going up.

Well, you and everyone have no proof of what will happen, by definition, but you could say exactly the same thing about SP500, and I guess you have probably your savings there. You 'don't know', but 'you believe', and you act based on that belief, which is based on history at least. If you don't really believe that the JPY will be stronger in 10 years, then it's OK to keep buying USD at this price (and in that case, you must have some case that I'd love to hear). But about 'most regulars on this forum', you can find a survey in this forum from a few months ago in which the big majority believed that the JPY would not even go beyond 130 JPY. We are now in 150 JPY. Does it make sense to keep buying at this price? I would really like to hear a reasoned explanation, if there is one. What I assume as the common position is that for SP500, it will eventually go up in the long term, and for developed-world currencies, they will fluctuate over some average zone in the long term. We haven't seen these values for decades, so we're clearly far from the average zone. If I'm wrong about all this, I would really like to know where.