SeekingAlpha.com: The tide is starting to change and I want to make sure my readers are aware. Last year, the yen literally beat the performance of 177 currencies. However, the rise has been so swift and severe, that it’s killing the country. No one in Japan seems to be happy with it. Their exporters are literally campaigning to the central bank to intervene in the currency. The central bank has been quoted as saying that they are not happy with the rise of the yen either.So what is a Japanese investor to do with such a strong yen that may not be that strong for long.
Invest abroad.
Here’s where the money is flowing!
Do we have any clue as to where they are starting to place their money? Yes! According to the Ministry of Finance, there have been “net purchases” of international stocks and bonds for the past seven weeks in a row now.
So where’s the money going? It’s working its way into places like Brazil, Mexico, Turkey and South Africa.
Therefore, money is being exchanged for the currencies of these lands and is further going into their bonds and stocks.
The yen gained an average of 55% against the currencies of these countries last year and they know that these gains will not hold. Therefore, they’re going into beaten down currencies with beaten down stock and bond markets.
It’s really important to note what these Japanese investors are doing, because they are smart investors. They get it right much more than they get it wrong. They are experts on international markets, because their own currency usually yields one of the lowest rates in the world. Therefore, they like to get into an appreciating currency that also has an appreciating stock or bond market.
A year ago, money was fleeing these emerging markets. However, they’ve plummeted so much and the yen has gotten so strong, it makes them one of the first groups of investors to march back into these markets.
In addition, one thing that you will see happening more and more this year in Japan is international mergers and acquisitions. There’s no better time to be buying when your currency is extremely strong and the stocks of international companies are extremely cheap. It’s a win/win for them.
They have done many of them already. In fact, their merger and acquisition activity tripled last year to $76 billion from about $25 billion the previous year.
All of this is beginning to cause a “net selling” of yen, finally, as the Japanese and other investors around the world exchange their yen for emerging market currencies around the world.
For those who are holding Japanese Yen or intending to short the currency, continue reading here are some idea what/where those smart Japanese investors are investing now.
* Skepticism is brewing that the US government 's bank rescue will not work. The US Treasury Secretary Geither has pledged government financing for as much as USD2T of efforts to spur new lending and address bank's toxic assets.
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