Camari Ellis'  Instablog

  

 

 

 

 

 Since, the United States is Japan’s largest export partner, accounting for approximately 20% of Japan exports, it is in Japan self interest to have a weak yen policy vs. the US dollar. If yen values appreciate, against currencies, such as the dollar, it will result in higher prices for imported Japanese goods in the US. On the other side of the coin, if yen values depreciate versus the US dollar, it will result in lower priced imported Japanese goods in the US. The key to Japan’s economic recovery is strong global demand for products, especially from the US. Recently, the yen fell 1.8% against the US dollar due to inspired optimism that US corporate earnings would continue to be positive for the remainder of the month. Several market movers, such as Apple, Pepsi, Wells Fargo, American Express and Ford are due to do release better then expected earning reports, which will help to mediate the battle that is being waged by the Bulls and Bears over market direction.

 

 

 

2008 delivered a critical blow to Japan’s Nikkei index, which lost approximately 40% of its value. Fortunately, this year has proven to be much better with Japan’s leading index posting a positive return of 6.04% YTD, as of July 17. According to Bloomberg data, the Nikkei and the S&P 500, over the last ten years, have been correlated by approximately 54%. If corporate earning actually do come out better then expected this could help to further promote a US equity rally and it is highly probable that the Nikkei will move higher as well.

 

  

Ironically, after reviewing price movements for the yen and Nikkei index, you will discover that YTD the yen has depreciated approximately -3.85% against the greenback and the Nikkei index has appreciated approximately 3.81%. Clearly this illustrates an inverse relationship between the yen and the Nikkei, in this current year. Over a ten year period the yen’s average versus the US dollar is approximately 112. If equity markets continue on its trajectory and the yen reach’s its ten year average vs. the US dollar, the Japanese economy could see a resurgence thus pulling it out of its deflationary vacation.