Email of the day on Japanese Bank funds
Comment of the Day

July 06 2017

Commentary by Eoin Treacy

Email of the day on Japanese Bank funds

Hello Eoin! Thank you for all your hard work for us! You highlighted the Japanese Banks a few Days ago! Is there a Japanese Banks ETF or a closed end Bank fund, that you know of. Best regards. (an FM since 1988).

Eoin Treacy's view

Thank you for your long support and this question which may also be of interest to other subscribers. There are two Japanese listed ETFs focusing exclusively on Japanese banks but I’m afraid I do not know of any others listed elsewhere whether ETFs or closed-end funds.

The two Japanese ETFs are the Daiwa Topix Bank ETF (1615 JP) and the Nomura Topix Banks ETF (1612 JP).  

A question I have been asking myself and raised in this Service over the last few months has been whether it was even possible for Japan to ignite inflation when the global economy was in one of the greatest periods of disinflation in history? This is a very big question for the Japanese market because a strong correlation with US Treasuries yields and the Nikkei-225 has been a feature of markets at various times over the last couple of decades and Japan is a major holder of US bonds.

Since central banks globally are adopting a more hawkish tone, and synchronised global economic growth is picking up, there is potential for inflation to pick up. There is perhaps no market that would benefit more from inflation’s return than Japanese stocks and particularly its banks.

Right now, global markets are digesting this pivot to a more hawkish tone so there is scope for an additional pause and my Nasdaq-100 short is still in the money suggesting some of the more overextended trends are indeed mean reverting. However, when we next move into a risk-on phase banks, resources and biotech are likely to be among the leaders. 

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