Investing with a weak currency - Japanese YEN?

Question

Hello,
I'm an American living in Japan with a Japanese YEN salary and the YEN is at an all time low against the dollar right now, which is raising a lot of concern. When I came in April, 2005, the yen was 105/dollar. Now, it's 123/dollar, which means 17 to 19% of my earnings are... gone. (I haven't converted/transferred any of my money yet.)

Obviously no one can answer questions about whether the yen will get stronger or not; Rather, I'm looking for suggestions on what to do with my money. I've read in a few places that the Japanese economy (even though stocks are at a record high right now) is still worthwhile to invest in since it's expected to be on the rise (a bull economy) until 2010 or so.

As an American living in Japan with a Japanese YEN salary, what is the best thing to do?
1) Wait and do nothing & hope for the YEN to get stronger.
2) Invest in Japanese stock
3) Invest in American (or other) stock
4) Other

Ideas?

Answer 1

One suggestion that might be worth considering is Canon stock. Here is the deal. Canon makes some of the best cameras in the world. A weaker yen improves their earnings power on export sales. Sell in dollars, report earning in yen. Maybe some TM--Toyota--also. Both rock solid and industry leaders. I expect that Japan is going to benefit greatly from the Chinese economy. Heck the Chinese are carrying dollars and they can buy their goods in yen at a very favorable conversion rate. Why not?

Answer 2

The only reason the Japenese Yen is so low is due to their almost non-existant interest rate (so cose to 0%). Due to it being so cheap to borrow money from Japan, people can Short the Japanese Yen (borrow japenese dollars they don't have and pay the almost 0% interest rate lol) and then they take that money and buy Austrialian dollars, Newzealand dollars/Euro's etc in order to get the much higher interest rate available in other countries. This has been pushing the Japanese Yen down for several years. It's called the carry trade. When it unwinds and people start covering their Japanese shorts, the currency will very rapidly increase and may be one of the best investments of the 21st century for an astute forex investor that gets in at the right time.

Basically, the Japanese Yen will eventually start shooting up when people begin covering their short positions. This will be facilitated and occur as soon as the Japanese decide to start raising interest rates. As long as the economy is doing good, there is probably a good chance interest rates will begin to rise. So... It's all up to the interest rates... and the Bank of Japan will eventually raise rates and the carry trade will unwind causing the Japanese Yen to rise very quickly in value. Right now they keep it low to help them export to other countries and remain competitive since the economy and real estate sector has been a bit shaky.

The U.S. Dollar is on its way down and will remain that way until the US government begins being fiscally responsible.

Answer 3

The answer for you is the same as a US citizen (or anyone else)...... diversify.

I don't know you so I can't suggest an "asset allocation", but in very general terms I'll share mine. I'm 58 and retired;

15% bonds
60% US Stocks (Large Cap, mid cap and small cap) highest concentrations in large and mid-cap).
25% In international stocks (which includes Japan).

US based mutual funds may be the best way to go.

On occasion I have money in EFT's for commodities & REITS.

Most of my investments are in USD. I do have a very (very) small amount in the yen. I've been waiting for it to "reverse" for well over a year...... I believe it will, but as you expressed.... who knows when.

Best of luck.