Yen hits 40-year low, Japanese stocks near records — momentum play on Japan
Thesis
The yen hitting a 40-year low is a massive tailwind for Japanese exporters, whose products become cheaper for the rest of the world to buy. Bloomberg reports Japanese stocks are set to climb on this exact dynamic. Meanwhile, Reuters notes that Asian stocks are on track for a record-breaking quarter. We connect these because the currency move directly amplifies corporate earnings for Japanese firms. As long as the yen stays weak without triggering a government intervention panic, Japanese equities have a strong fundamental floor under them.
Strategy approach
Build a rule-based strategy that enters long EWJ on D1 when USD/JPY makes a 20-day high and EWJ is within 2% of its 20-day high. Exit if USD/JPY drops below its 10-day low or after a 21-day max hold. Use a 5% trailing stop.