The world investment scenario supports buying yen selling global stocks
Marla Guthrie
Mar. 12, 2007

The Yen is ready to resume its upward journey for fair value. As Japanese economic cycles point to a sustainable medium term growth pattern within long-term secular deflation, the interest rates and fiscal environment in Japan is ready Yen to a very high level.

The higher Yen also means higher Yuan. The Asian currencies are in general under pressure from the Euro Zone and the United States to find some fair exchange rate grounds that allows free trade. Currently Yuan and Yen are both extremely undervalued.

As Yen rises, the exporters in Japan (with ripple effects all over Asia) are going to decline. The pressure on Nikkei will be very high. Nikkei will drag the rest of the world for now. The exporters in Japan will start the initial sell off.

The rise of Yen is imminent from fundamentals, analytics, chart patterns and quantitative models. It is extremely undervalued because of Bank of Japan’s persisting selling of Yen in open market and the fiscal measures in Japan.

The recent G-8 meeting changed all that. The rise of Yen will accompany global collapse in stock markets across the world. The Dow is about to resume its journey downwards while Asian stock markets take bigger beatings.

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