We believe the Yen, which rallied approximately 18% through the first three quarters of 2016, did so in part because expectations for Fed rate hikes were lowered in the first six weeks of 2016. That’s changed dramatically since Trump’s election, as prospects for future inflation and future GDP growth have improved. The Yen has weakened while US rates and the Dollar rose. This is providing a tailwind for Japanese stocks and for the earnings expectations for Japanese multinationals and Japanese banks this year. If one were neutralising the currency, Japanese stocks have been one of the best performing asset classes since Trump’s victory – up more than 17%. Given the current differential in interest rates, we believe investors wishing to gain exposure to the Japanese, and even European, equity markets should consider doing so in a currency-hedged fashion.
Long-term strategic investment implications
Short-term tactical trading opportunities
 As at 19 January 2017, as measured by the Nikkei 225 index.
 To 30 December 2016. Past performance is not indicative of future performance. You cannot invest directly in an index.
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