"(A stronger yen) will hurt outwardly focused large-conglomerates who will face an unfavorable domestic exchange rate, higher onshore borrowing costs and are also exposed to a weakening global economy," said Aninda Mitra, head of Asia macro and investment strategy at BNY Mellon Investment Management. While he believes it is too early to discuss specifics, markets are already worrying about the fate of the BOJ's vast asset holdings and expect the yen could quickly reverse last year's precipitous decline if its loose policy settings look like they may be unwound. He has begun laying the foundations for a shift by saying the bank will debate an exit strategy from its policies once inflation looks stable. The policy and communication challenge for new BOJ governor Kazuo Ueda is a tricky one. UBS' chief investment office is neutral and prefers China as a global slowdown looms. Swiss wealth manager Union Bancaire Privée is also underweight Japan, with the policy outlook presenting currency risks. He is yet to reveal his hand and the uncertainty seems to be holding back the next surge for investment and the currency, and could keep stocks from further gains. Now that inflation and growth have finally arrived, pressure is on the Bank of Japan's new governor to plot a course back to normality. "A very significant inflow from global investors (followed)," Powell said, "but then unfortunately, a lot of the enthusiasm has dissipated." He said more policy certainty would allow a better focus on domestic drivers.įor about two decades Japan has pressed deeper into uncharted territory with its monetary policy in a bid to revive growth after the 1990s asset bubble burst - taking interest rates to zero in 1999, below in 2016, and pinning down bond yields. "But I'm old enough to remember the excitement of Abe introducing the 'three arrows'," he said, in reference to former Prime Minister Shinzo Abe's economic reforms of a decade ago aimed reviving growth. "I think there is a potential sea change," he said, as some money flows in and there seems to be momentum building behind a governance push that is unlocking value from balance sheets via buybacks and other concessions to shareholders. The research arm of BlackRock, the world's biggest asset manager, recommends an "underweight" allocation to Japan and is waiting for policy uncertainty to clear, according to Ben Powell Asia-Pacific chief investment strategist at BlackRock Investment Institute. Some say that caution is only heightened by the perilous policy path ahead. Yet for many, the lofty milestones are a reminder that Japan's stocks have gone sideways for years, making many foreign asset allocators reluctant to venture into the market. Riding a wave of buybacks and strong corporate earnings, and pumped up by a weak yen, the broad Topix (.TOPX) index scaled peaks not seen since 1990 this week and the benchmark Nikkei (.N225), up more than 3% in four days, is near similar heights. HONG KONG, May 18 (Reuters) - As Japan's stock market roars to multi-decade highs, large investors with long memories say they are staying out, wary of sagging momentum and the prospect the central bank will unwind its massive monetary stimulus.
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