By James Saft
(Reuters) – Buy Japanese stocks if you must but don’t expect Abenomics and the fall of the yen to revitalize Japan’s economy.
The yen has fallen by more than 20 percent since Prime Minister Shinzo Abe, who advocates aggressive monetary and fiscal policy, was elected in December, busting through the 100 yen to the dollar level last week.
In part the theory behind Abenomics is that a weaker yen will revitalize industry, which will export more and plow the proceeds into hiring and capital investment.
The stock market certainly believes: benchmark shares in Tokyo are up 36 percent this year and more than 68 percent over six months.
But a look at the actual data shows Japanese companies, like British ones during a similar bout of currency weakness in 2008, appear to be more eager to use a newly competitive currency to pad profits through higher margins rather than higher export volumes.