FX.co ★ Weak yen to impact earnings of Japanese firms

Some reputable stock market experts are cautioning against Japan's heavy reliance on the weak yen, Bloomberg reports. As a rule, a cheap national currency is viewed as a benefit for exporters as it boosts their earnings. However, this may not be a favorable factor any longer since many firms have become vulnerable to the sustainability of earnings. Thus, Colin McQueen, a manager at T. Rowe Price International Equity Fund, pointed out that the yen is currently nearing its 30-year low. Now, many Japanese companies focused on exports might see a reduction in revenues due to the country's dependence on a depreciating yen. “Some of the export-oriented businesses at present have done well from the weak yen,” McQueen explained. “You might find a bit of rotation in terms of which stocks are benefiting in a more inflationary environment,” he added. Earlier, Bank of Japan Governor Kazuo Ueda fueled speculation that the regulator is laying the groundwork to normalize its ultra-loose monetary policy. Analysts believe that such a move could result in a global repositioning of investment portfolios. Given the current scenario, markets anticipate a liquidity crunch in Japan which has been maintaining a negative interest rate policy for quite a long time.