There have been signs lately that foreign investors are losing their appetite for Japanese equities.
Anticipating better times, Japanese equities last year grew faster than the Dow Jones industrial average.
Since February, he has been buying Japanese equities and hedging his exposure to the yen's moves.
Likewise, the yen is unlikely to weaken unless and until foreign buying of Japanese equities declines.
Jefferies Co. of the U.S. has restarted brokerage in Japanese equities after stopping this business in 2009.
The latest thrust in Japanese equities comes from a very oversold condition after a grinding bear market.
Kikuchi notes that already this year foreign buyers have been JPY 2 trillion net buyers of Japanese equities.
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The graph shows relative shares of holdings of all listed Japanese equities (from 2004 including Jasdaq listings) since 1988.
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With stocks now falling, many appear to be selling their Japanese equities positions.
"You might have better returns overseas, " said Mr. Kubota, though he still sees "lots of potential in Japanese equities".
Yet markets were unimpressed as Japanese equities dropped and the yen fell 1.5% against the greenback after the announcement.
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So it is hard to say whether Japanese equities simply a portfolio diversification option, or an optimistic vote of confidence?
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Although everyone recognizes the country's fiscal hole, investors have embraced Japanese equities, pushing up their indexes by 25% in 2005.
The Japanese stock market is weak, and foreign investors have turned from being net buyers to net sellers of Japanese equities.
During the year foreign institutions were net buyers of JPY 3.2 trillion of Japanese equities, an increase of 81 percent over 2009.
The global market is itself a trememndous buy right now and it is only right to put Japanese equities under the immediate spotlight.
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As a result, Japanese equities have shown more life in recent weeks (up more than their American counterparts are this year) than in the previous decade.
This is the stuff of which bull markets are made: A favorable credit cycle, real estate recovery and government reform are all underpinning strength in Japanese equities.
Markets believed him, with Japanese equities gaining nearly 20% in the third quarter and the yen weakening 12% both against the U.S. dollar and on a trade weighted basis.
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Unlike current systems, Pendo can work in three currencies, so a fund buying Japanese equities on an American market can enter the price in Australian and American dollars and Japanese Yen.
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In addition to single strategy hedge funds that may invest in Japanese equities or high-yield bonds of technology stocks, there are even funds whose sole purpose is to invest in other funds.
Japan Inc. is now in the business of making money for investors, which is one reason why Japanese equities have been so perky of late, having lain etherized upon the table for a decade.
Second, the impressive rally on the Nikkei (up 18% in dollar terms so far this year), largely driven by foreign investors' guarded bullishness on Japanese equities, suggests that the economy could bottom out soon.
"People outside Japan are clearly viewing Shirakawa's track record negatively, " said Julian Jessop, chief global economist at Capital Economics, referring to the renewed interest in Japanese equities by foreign investors anticipating more easing under Mr. Kuroda.
There are very few assets I would be long: gold, Japanese and Eurozone equities are some I do like.
Right now, only 11% of Japanese financial assets are invested in equities and mutual funds, compared with 45% in the U.S. and 22% in Europe.
Japanese companies, which have been net sellers of equities for the past six years or so, are still selling them in order to avoid further unrealised losses on their equity portfolios.
Third, the increasing acceptance of Sony's recently unveiled restructuring plan could signify a fundamental change in Japanese corporate culture and this has further fuelled foreign buying of equities (although it is still early to conclude that Sony-style restructuring could form a critical mass).
Suddenly European insurers had begun to seem like Japanese ones, with the possibility that they might become forced sellers of equities if markets tumbled further, reinforcing the fall.
With interest rates declining throughout the 2000s, and a Western and Japanese unified monetary policy of easy money greasing the wheels, investors geared up into equities on margin.
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