JPMorgan Securities Japan strategists, including Rie Nishihara, anticipate that a strengthening yen could alleviate upward pressure on Japanese government bond yields. This, in turn, is expected to accelerate the recovery of Tokyo-listed artificial intelligence (AI) and semiconductor shares. Real estate shares, which have also underperformed recently, are projected to benefit from these same dynamics.
Conversely, the strategists also noted that certain sectors are vulnerable to negative earnings impacts from a rising yen. These include industries such as transportation and logistics, as well as the automotive sector. This indicates a nuanced outlook for the Japanese market, where currency movements will create both winners and losers among different economic segments.
Japanese equities have seen a shift in investor focus, moving from value-oriented companies to growth stocks, largely driven by the AI boom. Firms linked to AI infrastructure are increasingly leading market capitalization rankings, surpassing traditional manufacturers and telecommunications giants that historically dominated. This trend is attracting growth funds, with strategists like Kei Takizawa of AllianceBernstein Japan highlighting the growing importance of Japanese companies in building global AI infrastructure. Despite the yen's historic slide raising concerns about curbing foreign inflows, overseas-listed exchange-traded funds indicate a robust appetite for Japanese equities, especially those investing on an unhedged basis. The strong performance of technology and semiconductor stocks, fueled by global AI investment expectations, has contributed to recent market gains, with Advantest rising 4.1% and Lasertec gaining 5.0%.
