Dear David, Happy New Year for you and all the team in London and California. How do you think a stronger yen could impact Japanese exporters like Fanuc or Sony? Does this scenario change your view about the Nikkei? Thank you for your thoughts! Best wishes

David Fuller's view

Thank you for your greetings and interesting questions.

The firmer yen is a bit of a headwind for Japanese exporters but is almost forgotten in 2016’s panicky start to the year.  I think we are just seeing a partial unwinding of yen hedge shorts, which are probably no longer necessary in the Y120 region.  

As for the current stock market panic, despite favourable seasonable factors, we know this is a periodic risk.  When it occurs, selling is followed by an expanded list of ‘reasons and concerns’. China’s circuit breaker experiments are probably at the top of this list, followed by the weakness of commodities caused by too much supply.  Leverage and electronic trading add to the volatility.  When this squall ends, I suspect Japan will resume its outperformance.