RetireJapan

I am sure many of us were feeling pretty flush the last few years, as the stock market (Japan and the US in particular) was flying high despite COVID.

Seems like the good times have come to an end. S&P is down 12% this year. There has been a fair bit of inflation overseas, and energy prices are no doubt going up, which will just add to that. Mix in more supply chain disruption due to the ongoing war (hopefully not one that expands).

And to top it all off the yen is at a 6-year low.

Holding yen in cash is safe but not ideal with inflation hitting. The Japanese stock market is one option, but it had been weak up until recently, and I fear it will slip back. Overseas investments are pricey with this current exchange rate.

We sold a lot of our individual stocks in January/early February, with a view to slowly moving that cash into index funds over the next year or two.

My observation of the yen is that usually when there is uncertainty or stock market weakness people buy yen for stability, so I would expect the yen to rise if we see further stock market volatility. That's my hope, anyway!

For people who don't have lump sums, I would just ignore everything and keep making those monthly purchases

TJKansai wrote: ↑Tue Mar 15, 2022 4:13 am I am sure many of us were feeling pretty flush the last few years, as the stock market (Japan and the US in particular) was flying high despite COVID.

Seems like the good times have come to an end. S&P is down 12% this year. There has been a fair bit of inflation overseas, and energy prices are no doubt going up, which will just add to that. Mix in more supply chain disruption due to the ongoing war (hopefully not one that expands).

And to top it all off the yen is at a 6-year low.

Holding yen in cash is safe but not ideal with inflation hitting. The Japanese stock market is one option, but it had been weak up until recently, and I fear it will slip back. Overseas investments are pricey with this current exchange rate.

I was thinking the same myself. And to be honest I think the governments would like to see an increase in inflation to reduce the value of that huge amount of debt overtime. Also I think with interest rates at crazy lows, they might need to bring those interest rates back up, to give them something to use for when they need to CUT interest rates again in the future.

I really don't know much about currency strengths and weaknesses, and no matter how much I read, it still doesn't stick, especially when comparing 1 single yen to a pound.It just seems like a see saw. My interpretation is Japan likes a weak yen so when it brings a dollar/pound back to Japan it gets MORE YEN! NO?

Any good tutorials on this.
If the yen weakens this make the pound stronger.So when this happens, that's when I should convert my pounds to yen?
I just seem to watch the apps.LOL

RetireJapan wrote: ↑Tue Mar 15, 2022 4:46 am For people who don't have lump sums, I would just ignore everything and keep making those monthly purchases

This. And I would add, if you're investing for the long term and won't need the money for a decade or more, all the more so. Trying to predict short-term outcomes, and making moves to counter those predictions, rarely ends well.

mighty58 wrote: ↑Tue Mar 15, 2022 12:17 pm

RetireJapan wrote: ↑Tue Mar 15, 2022 4:46 am For people who don't have lump sums, I would just ignore everything and keep making those monthly purchases

This. And I would add, if you're investing for the long term and won't need the money for a decade or more, all the more so. Trying to predict short-term outcomes, and making moves to counter those predictions, rarely ends well.

My question is what to invest in. With the yen so weak, it may make sense to hold off in buying non-yen funds/companies.

TJKansai wrote: ↑Wed Mar 16, 2022 11:15 am My question is what to invest in. With the yen so weak, it may make sense to hold off in buying non-yen funds/companies.

I think that is likely to be noise too. The yen might end up stronger or weaker in the future, as might yen-denominated assets. Best to ignore it and stick to the plan...

RetireJapan wrote: ↑Wed Mar 16, 2022 11:49 am

TJKansai wrote: ↑Wed Mar 16, 2022 11:15 am My question is what to invest in. With the yen so weak, it may make sense to hold off in buying non-yen funds/companies.

I think that is likely to be noise too. The yen might end up stronger or weaker in the future, as might yen-denominated assets. Best to ignore it and stick to the plan...

I would argue as a fellow Brit and since the UK took leave of its senses and voted for Brexit, the pound has been at record continuous lows against the Yen (130-150yen to the pound) for a good six years now. Pre-Brexit I always worked of 200 yen to the pound.

In other words I think paying off sterling denominated mortgages for those who have them has been and will be the best thing you could do for the short to medium term if you are residing in Japan.

Wales4rugbyWC19 wrote: ↑Wed Mar 16, 2022 10:58 pm I would argue as a fellow Brit and since the UK took leave of its senses and voted for Brexit, the pound has been at record continuous lows against the Yen (130-150yen to the pound) for a good six years now. Pre-Brexit I always worked of 200 yen to the pound.

In other words I think paying off sterling denominated mortgages for those who have them has been and will be the best thing you could do for the short to medium term if you are residing in Japan.

Sure, that makes sense. Carry on with the plan

I think that goes to show that exchange rates shift and it might not be realistic to expect them to go back to whatever level someone thinks they should be at (the current 'weak' yen, for example). For most investments the value of the underlying asset is what matters, not the currency it is denominated in. Cash reserves being one exception, and real estate another I guess.

RetireJapan wrote: ↑Thu Mar 17, 2022 12:48 am I think that goes to show that exchange rates shift and it might not be realistic to expect them to go back to whatever level someone thinks they should be at (the current 'weak' yen, for example). For most investments the value of the underlying asset is what matters, not the currency it is denominated in. Cash reserves being one exception, and real estate another I guess.

You can think of the price of assets such as equity and index fund prices in the same currency as consisting of two components:
The Present Value of the Future Earnings
And
The P/E Ratio - The multiple that people are willing to pay for the Future Earnings

So that the Share Price = The Present Value of the Future Earnings x The P/E Ratio

However, investing from JPY, you can think of the price of overseas assets such as equity and index fund prices as consisting of three components:

The Present Value of the Future Earnings
The P/E Ratio - The multiple that people are willing to pay for the Future Earnings
And
The JPY Exchange Rate

So that the Share Price in JPY = The Present Value of the Future Earnings x The P/E Ratio x The JPY Exchange Rate

If you are buying Overseas Assets such as Stocks or Mutual Funds in the Foreign Currency, then

If you buy when the P/E Ratio is very large due to excessive Market Optimism, and then gets compressed due to Market Pessimism, even if the company's earnings goes up, the Share Price will go down.

This is further exacerbated if the Exchange Rate moves against you; i.e. if you bought the stock when the Yen was relatively Weak (say greater than 115) and the Yen gets Stronger (say less than 110).

The Yen has swung from 120 to 86 and back to 125 and now back to 118 on the last 20 years...
You cannot control it, but you could profit from it by buying more overseas assets and fewer Japan assets during times of Yen Strength, and switching to buying more Japanese assets and fewer Overseas assets during times of Yen Weakness, and back again, maybe even switching assets during times of Yen Weakness to Japan, and during times of Yen Strength to Overseas assets.

To maximize your profit potential, you want to ideally buy foreign assets when the Yen is relatively Stronger and the P/E Ratios are relatively on the lower side due to excessive Market Pessimism. You can then reap the Tripple Wammy of the P/E expansion and the Weakening Yen, as well as the growth in company earnings.

Unfortunately, many discussions of investing assume the same currency, and fail to take exchange rates into account.

Tkydon wrote: ↑Fri Mar 18, 2022 11:56 am If you are buying Overseas Assets such as Stocks or Mutual Funds in the Foreign Currency, then

If you buy when the P/E Ratio is very large due to excessive Market Optimism, and then gets compressed due to Market Pessimism, even if the company's earnings goes up, the Share Price will go down.

This is further exacerbated if the Exchange Rate moves against you; i.e. if you bought the stock when the Yen was relatively Weak (say greater than 115) and the Yen gets Stronger (say less than 110).

The Yen has swung from 120 to 86 and back to 125 and now back to 118 on the last 20 years...
You cannot control it, but you could profit from it by buying more overseas assets and fewer Japan assets during times of Yen Strength, and switching to buying more Japanese assets and fewer Overseas assets during times of Yen Weakness, and back again, maybe even switching assets during times of Yen Weakness to Japan, and during times of Yen Strength to Overseas assets.

This assumes that future conditions will mirror the past, and that an individual can tell when things are 'over' or 'under' valued (and when they will return to their 'true' value).

None of which I believe I am capable of