Analysis of the Impact of a Weakening Japanese Yen on Asian Stock Markets and Valuations of USD-Denominated Portfolios

Based on systematic data collection and analysis, we now present to you a complete investment research report.

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As of January 13, 2026, the U.S. dollar to Japanese yen (USD/JPY) exchange rate is trading around

, approaching the weakest level since January 2025 [1]. Since September 2024, the Japanese yen has depreciated by a cumulative , falling from 146.09 yen per U.S. dollar to the current level of 158.76 yen per U.S. dollar [0].

Key Price Point	Implication	Market Expectation
160.00	Trigger level for four Japanese authorities’ foreign exchange interventions in 2024	High intervention risk zone
158.00	Current market psychological threshold	Focal point of long-short competition
152.00	“Unidirectional fluctuation” warning level mentioned by Japanese Ministry of Finance officials	Intervention risk accumulation zone

The latest strategy report from Bank of America indicates that when USD/JPY approaches the

level, investors should consider closing yen short positions, calling this a “tactical position reduction opportunity” as intervention risks are increasing significantly [2].

There are clear divergences in the market regarding the future trend of the Japanese yen:

• Yen Bears
  : Mitsubishi UFJ Morgan Stanley Securities expects the yen to depreciate again to 160 by the end of 2026; Japan’s Fukuoka Financial Group is more aggressive, predicting the yen may depreciate to 165 [3]
• Yen Bulls
  : Nomura Securities predicts the yen will appreciate to 140 (USD/JPY=140) by the end of 2026, believing that the change in Fed chair will lead to a shift in the pace of interest rate cuts [3]
• Neutral View
  : Masayuki Yoshikawa, Chief Macro Strategist at Sumitomo Mitsui DS Asset Management, stated that if expectations of a Bank of Japan interest rate hike rise, the narrowing of the U.S.-Japan interest rate differential may drive the yen higher

Notably, based on historical data,

[4]. The yen exchange rate has shown strong support since the start of 2026, mainly due to:

1. Persistent vigilance regarding exchange rate interventions by the Japanese government and central bank
2. Strengthened verbal intervention by South Korean authorities to curb won depreciation, which may have a demonstration effect
3. Balanced long-short forces ahead of the January 2025 low (158.80 yen) and the 160 yen threshold

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Yen depreciation has shown

characteristics for the Japanese stock market, particularly for export-oriented enterprises. According to our company’s data analysis [0]:

• Closed at
  53,568.62 points
  on January 13, 2026, rising
  1.44%
  on the day
• Cumulative increase of approximately
  5.33%
  since the start of 2026
• Shows a
  positive correlation with USD/JPY (correlation coefficient of approximately 0.61)

Growing market expectations that Japanese Prime Minister Sanae Takaichi may dissolve the House of Representatives on January 23 and hold an early general election in February have driven the so-called “Sanae Takaichi Trade” to regain momentum [1]. The logic behind this trade is based on:

1. Sanae Takaichi advocates implementing “responsible proactive fiscal policy”
2. Expectations of fiscal expansion support the stock market
3. A dovish monetary policy stance is conducive to yen weakening, forming a “stock and currency bull market” pattern

Sector	Benefit Logic	Market Performance
Automobile	Enhanced export competitiveness	Toyota Motor (7203.T) has risen over 9% year-to-date [0]
Electronics	Appreciation of repatriated overseas income	Contributes to the main gains of the Tokyo Stock Price Index
Finance	Rising long-term government bond yields	Japan’s 30-year government bond yield rises to 3.52% [1]

The impact of yen weakening on other Asian stock markets shows

:

• The Hang Seng Index has a correlation of approximately
  0.72
  with USD/JPY, showing a high positive correlation
• Closed at
  26,866.50 points
  on January 13, 2026, falling 0.34% on the day
• Technology and consumer stocks are significantly affected by capital flows [0]

• The Korea Composite Stock Price Index (KOSPI) is also indirectly affected by the yen
• South Korean authorities have launched verbal intervention, not wanting the won to depreciate excessively following the yen [4]
• The National Pension Service (NPS) of South Korea buys the won through foreign exchange hedging

The continued weakening of the yen poses significant pressure on

:

• The traditional strategy of borrowing low-interest yen to buy high-yielding assets faces losses
• Yen short positions established in recent years continue to come under pressure
• A rapid reverse fluctuation could trigger
  systematic unwinding risk

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For USD-denominated investors, yen depreciation directly leads to

:

Asset Category	Value in JPY	USD/JPY Change	Impact in USD Terms
Nikkei 225 Index	53,568 points	158→160 (+1.3%)	-1.3%
Japanese Government Bonds	100 JPY face value	158→160 (+1.3%)	-1.3%
Japanese Equity Portfolio	10 trillion JPY	158→160 (+1.3%)	-1.26 billion USD

Taking Toyota Motor as an example, its share price in JPY rose from 2,789.50 JPY in September 2024 to 3,577 JPY (a 28.23% increase), but the increase in USD terms needs to deduct approximately 8% exchange rate loss [0].

Yen depreciation has a significant

on Japanese export enterprises:

1. Revenue Side
   : Overseas sales revenue automatically appreciates when converted to JPY
2. Cost Side
   : Domestic production costs are relatively reduced
3. Competitiveness
   : Export product pricing has more flexible room

Taking Toyota Motor as an example, its Q2 2025 financial report shows actual EPS of 74.36 USD, exceeding expectations by 42.81%, with the weak yen clearly boosting its performance [0].

In the face of continued yen weakening, USD-denominated portfolios may consider the following hedging strategies:

Strategy Type	Operation Method	Applicable Scenario
Foreign Exchange Forward	Sell USD/JPY forward contracts	Long-term holdings of Japanese assets
Yen Call Option	Buy yen call options (USD/JPY put options)	Hedge against extreme depreciation risks
Increase Export Exposure	Overweight export-oriented Japanese stocks	Beta strategy to benefit from yen weakening
Diversified Allocation	Increase allocation to other Asian markets	Reduce single-currency risk

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Japanese Finance Minister Satsuki Katayama held an official meeting with U.S. Treasury Secretary Bessent on January 13, 2026, regarding the weakening yen [1]. Their core concerns include:

1. Joint Statement
   : Katayama stated that “concerns were expressed regarding the unilateral weakening of the yen,” and Bessent “shared these concerns”
2. Communication Mechanism
   : The two sides agreed to maintain close communication at the deputy minister level regarding exchange rate movements
3. Policy Signal
   : Emphasized that “disorderly market fluctuations” could trigger intervention

In 2024, Japanese authorities

when the yen exchange rate approached the 160 threshold, buying yen to support the exchange rate [1]. These actions established important reference points for potential future interventions.

Although the U.S. and Japan have initiated policy communication, there are

on the actual coordination space:

Factor	Impact Analysis
Pressure from the Trump Administration	A weak dollar aligns with the “America First” trade policy orientation
Fed Independence Crisis	Powell faces criminal investigation, increasing monetary policy uncertainty
Treasury Priorities	Bessent also needs to address diplomatic issues such as sanctions against Venezuela

Factor	Impact Analysis
Political Cycle	Uncertainty surrounding an early general election may delay policy actions
Economic Recovery Needs	Yen weakening supports the export-oriented economy
Debt Burden	Japan’s government debt/GDP exceeds 260%, a too-strong yen increases debt-servicing pressure

Based on the above analysis, we have constructed five scenarios for U.S.-Japan policy coordination:

Scenario	Probability	USD/JPY Target	Policy Implications
Baseline Scenario (No Intervention)	40%	162	Verbal warnings but no actual action
Verbal Intervention (Warnings)	25%	158	Joint statement issued by both sides warning speculators
Foreign Exchange Market Intervention	20%	155	Japan unilaterally or U.S.-Japan jointly buys yen
Joint Policy Action	10%	152	Policy coordination between the Fed and the Bank of Japan
Bank of Japan Interest Rate Hike	5%	148	Expectations of monetary policy normalization drive yen appreciation

: Dominated by , with the probability of actual foreign exchange market intervention around 20%. The reasons are:

1. The U.S. Treasury finds it difficult to publicly support yen strength, which conflicts with its weak dollar policy
2. There are internal disagreements within the Japanese government on the timing of intervention
3. Political uncertainty ahead of the early general election limits policy actions

Based on historical experience and official statements, the following situations may trigger actual intervention:

• USD/JPY breaks through 160 and continues to rise rapidly
• Yen volatility surges sharply in the short term
• Speculative short positions are excessively concentrated
• Unilateral depreciation trend lasts more than 3 months

• Sufficient balance in the Foreign Exchange Fund (FEF)
• Historical single intervention scale can reach 3-5 trillion JPY
• Can choose between public or covert intervention methods

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Strategy	Recommendation	Stop-Loss Level
Tactical Reduction of Yen Short Positions	Close positions in the 160-161 range	162.5
Buy Yen Call Options	Strike price 150, 3-month tenor	-
Range Trading	Buy low and sell high in the 155-161 range	2% break above/below the range

1. Overweight export-sensitive sectors
   : Automobiles, electronics, machinery
2. Neutral allocation to the financial sector
   : Benefits from a steepening government bond yield curve
3. Underweight yen-sensitive assets
   : Real estate, import-dependent enterprises

1. Accept exchange rate discount
   : The downward adjustment of yen valuation is a realized risk; consider long-term holdings of high-quality Japanese assets
2. Focus on structural opportunities
   : Alpha opportunities brought by Japanese corporate governance reforms and improved capital efficiency
3. Maintain exchange rate hedging
   : Hedging costs are approximately 1-2% per year, but can eliminate tail risks

1. Diversified allocation
   : Avoid excessive concentration in the Japanese market
2. Monitor carry trade reversal risk
   : A rapid appreciation of the yen could trigger sharp fluctuations in Asian markets
3. Allocate to safe-haven assets
   : Gold, yen cash can hedge tail risks

Risk Type	Risk Description	Response Recommendation
Intervention Risk	Sudden foreign exchange market intervention by Japanese authorities	Reduce yen short exposure above the 160 level
Policy Risk	Escalation of the Fed independence crisis	Monitor the trend of the U.S. Dollar Index
Political Risk	Uncertainty surrounding Japan’s early general election	Reduce risk exposure before the election
Liquidity Risk	Unwinding stampede of carry trades	Set stop-loss levels and control leverage
Valuation Risk	Japanese stock market valuations have partially priced in the weak yen expectation	Focus on fundamentals rather than exchange rate factors alone

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1. Yen Trend
   : USD/JPY has depreciated to around 158, approaching the 160 intervention threshold. Institutional forecasts are highly divergent; the year-start effect may provide short-term support, but the medium-term trend remains downward.

2. Impact on Asian Stock Markets
   : The weak yen constitutes a significant tailwind for Japanese export enterprises, and the Nikkei 225 Index has a positive correlation with the yen. Other Asian markets are relatively less affected, but attention should be paid to the risk of carry trade reversal.

3. Impact on Portfolios
   : Valuations of USD-denominated Japanese assets face an exchange rate discount of approximately 8-12%, but the profit growth of export enterprises can partially offset this impact. Hedging or adjusting the allocation structure is recommended.

4. Policy Coordination Outlook
   : U.S. and Japanese monetary authorities have initiated policy communication, but actual coordination space is limited. Verbal intervention is the most likely measure, with the probability of actual foreign exchange market intervention around 20%. Intervention triggers need to meet the criteria of “disorderly market fluctuations”.

5. Trading Recommendations
   : Consider reducing yen short positions in the 160-161 range in the short term; focus on alpha opportunities brought by Japanese corporate governance reforms in the medium to long term; maintain appropriate exchange rate hedging to address tail risks.

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[0] Jinling AI Financial Database - Market Data and Technical Analysis (January 13, 2026)

[1] Sina Finance - “Sanae Takaichi Trade Makes a Comeback! Japanese Stocks Open Strong, Yen Approaches One-Year Low” (January 13, 2026) https://finance.sina.com.cn/stock/hkstock/ggscyd/2026-01-13/doc-inhhchnf5106521.shtml

[2] Investing.com - “Bank of America Suggests Considering Closing Long Positions as USD/JPY Approaches 160 Threshold” (January 12, 2026) https://cn.investing.com/news/forex-news/article-93CH-3160740

[3] FastBull - “Yen Exchange Rate Breaks Below 158! Strong Dollar, Japanese Prime Minister May Call Early Election” (January 12, 2026) https://m.fastbull.com/cn/news-detail/4364963_1

[4] Nikkei Chinese - “Will the Yen Turn to Appreciation?” (January 12, 2026) https://cn.nikkei.com/politicsaeconomy/stockforex/60977-2026-01-12-05-00-15.html

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: January 13, 2026 11:51 CST
: Jinling AI Financial Analysis Team