Japanese stocks are cheap again

In recent weeks, I’ve been asked by many readers about my next stock analysis. The truth is, I’ve been hesitant to release new recommendations. The meteoric rise of Japanese stocks left me jaded. For a long time, I found myself delving deeper and deeper to uncover truly undervalued stocks. At times, I felt like I was betraying my readers by recommending companies that only appeared cheap in an overheated market. However, the massive fall these past days have changed the landscape dramatically, and I believe there are now genuine opportunities worth exploring.

For context, the Nikkei 225 has plunged 16.60% in less than a month, and the index has now only managed a modest increase of 2.4% since the beginning of the year. Simultaneously, the yen has shown signs of strengthening again, with the USD/JPY exchange rate reaching around 145 JPY for one USD, from its record low in July at around 162 JPY.

So, what has fundamentally changed?

The significant market downturn and the yen’s recent appreciation might seem like a recipe for a continued fall in Japanese stocks, and this fall might continue for a while. However, when we take a broader view, several factors indicate that this might be a prime time to reassess and reinvest in the market.