Many people are aware that the Japanese yen has depreciated significantly this year. At the beginning of the year, the exchange rate was 115 yen to the US dollar, but by late October, the yen's value had plummeted to 151.9 yen per dollar, marking a drop of over 30%. Even with some rebound in recent times, the yen has still fallen by more than 20% this year.
However, contrary to expectations, many individual investors in Japan do not feel like they have lost money; instead, they feel like they have made a profit. Now, astute Japanese institutions are starting to purchase Chinese bonds.
01. Earnings from Overseas Stocks
For many people who do not travel abroad or engage in overseas consumption, the depreciation of the currency seems to have little impact. For many individual investors in Japan, they not only invest domestically but also participate in overseas investments to a certain extent. In this case, they have actually gained additional income.
Tokyo, Japan, is one of the financial centers in Asia. It has attracted a lot of foreign capital, and through the Tokyo market, many ordinary Japanese people also invest overseas, such as purchasing foreign stocks and bonds. More ordinary people invest in overseas markets through mutual funds and other means.
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Although the yen has depreciated sharply this year, for the Japanese public, it means a more significant appreciation of the US dollar. Therefore, the securities they hold through overseas investments, which are priced in US dollars, have also yielded higher returns.A Japanese investor has done some calculations online regarding an investment he made at the beginning of the year. He invested 3 million yen to purchase a portfolio of U.S. stocks. Although this portfolio has declined by nearly 10% in U.S. dollar terms since the beginning of the year, resulting in a paper loss after he sold, when he exchanged these U.S. dollars back into yen, he actually made a profit of over 10%.
Similarly, some investors who have purchased U.S. Treasury bonds through funds are also selling them recently, yet they have also achieved certain returns. Since the beginning of this year, the prices of U.S. Treasury bonds have fallen significantly, with many Japanese retail investors having bought these bonds through funds and starting to sell them in July of this year. Although they have incurred losses on the bond prices, they have gained on the exchange rate of the U.S. dollar, and after offsetting each other, they have actually made a profit.
If we look at it from this perspective, the Bank of Japan is the institution with the most U.S. Treasury bond holdings, as it previously held the number one position among global overseas buyers of U.S. Treasury bonds. In recent months, the Bank of Japan and other institutions have also been selling U.S. Treasury bonds on a large scale, and when calculated in yen according to the exchange rate, the holding period of this batch of U.S. Treasury bonds has also yielded considerable returns.
Of course, Japan's selling of U.S. Treasury bonds is not to take profits but to obtain funds by selling the bonds, buying yen in the foreign exchange market, and saving the falling exchange rate of the yen.
03, The Japanese Stock Market is Doing WellAdditionally, Japanese individual investors are also excited by the Japanese stock market. This year, global stock markets have not performed well. Looking at the stock markets of developed countries, the Japanese stock market is very likely to become this year's annual champion. Currently, only the United Kingdom is ahead of Japan. The latest data shows that since the beginning of this year, the Nikkei 225 Index has fallen by 2.86%, while the UK's FTSE 100 Index has risen by 1.7%, with a difference of less than 5 percentage points. In the next month, the stock markets of the two countries will compete for the annual yield championship. However, the good performance of the Japanese stock market this year is not linked to the economy, but to Japan's monetary policy. So far, the world's major economies have been raising interest rates, and Japan is one of the few countries that still insists on monetary easing. A large amount of liquidity has supported the continuous fluctuations of the Japanese stock market without a significant decline. For most people in Japan, they have money but no better investment methods, so they are also willing to invest funds in the stock market.
04, Buying Chinese Bonds
Recently, Japanese institutional investors have gained a new investment option, which is to buy Chinese bonds.Previously, Japanese financial institutions had a preference for holding U.S. Treasury bonds, but recently, they have begun to gradually shift their funds into other investments. A portion of these funds has been allocated to purchasing Renminbi (RMB) bonds. For the Japanese yen, the RMB is also appreciating, and there is a more critical factor regarding RMB bonds: they are very safe. Even with minor fluctuations, they will not experience a significant drop like U.S. Treasury bonds.