Do you overweight Japan in your equity portfolio?
Many financial advisors recommend a home country bias to reduce FX risk.
The yen could spike temporarily again if/when the carry trade unwinds or the FRB cuts drastically, but I find it hard to imagine it retaining the same level of safe haven status it had in 2008 and 2010.
At the moment, I’m happy with Japan’s 5% weighting in the global index and my yen cash reserves.
Alternatively, do you overweight Japan because you think TOPIX or Nikkei are better value than other markets?
I found this Reuters article interesting about safe havens:
https://www.reuters.com/markets/currencies/japanese-yens-safe-haven-illusion-shatters-2025-11-19/
by GachaponPon
6 comments
To be honest; my stock is all outside Japan, silver or gold. The yen has been falling, and with the current decline in population, i’m kind of hesitant. The only thing I have here are bought apartments in the bigger city areas.
Only in so much that I have a portion of my NISA always dedicated to DRP investment funds and Japan is a market where dividends are still popular.
The core reason and this isn’t advice is dividend reinvestment can legally snowball you past the NISA limits I’ve been told.
Realistically of course dividend income is pretty small so it’s not like you’re doubling your NISA limit even if you go 100% dividend funds but I just like to feel like I’m getting one over the taxman lol.
Not an index investor but yes I am overweight Japanese equities. There’s been a big run up since 2020 (the TOPIX has doubled) but still a lot of value out there.
I can’t pick winners (companies or countries) anymore that I can time the market. So 100% global tracker is fine for investments. Simple and best performance.
In any case my NW is already considerably linked to Japan in both asset and liabilities (salary, home, living costs, social security, pension, taxes) so I see no point in over weighting any further.
I intend to be here forever and feel more comfortable having a substantial portion in domestic dividend stocks, mutual funds, and ETFs. A lot of things I buy are what a lot of retirees buy and hold, so I feel like there’s a little bit of a “safety in numbers” aspect to it. I do also have a fair chunk of cash at the moment offsetting a home loan, though, and would probably put some of that in overseas ETFs if they correct in yen terms by 30% or so as could easily happen.
As a household we’re probably 20% cash (which would disappear if we paid the mortgage off), 20% gold, 40% domestic exposure, and 20% in leveraged overseas exposure with the US underweighted.
I’ve long given up on trying to form hypotheses about FX movements. “Conventional wisdom” as of last year was that USD/JPY would be significantly lower by now.
No one knows what the currency market or the stock markets will do. So you need to spread your bets around and of course real estate can be part of that because it too can be a hedge on currency and inflation.
I think if you are based in Japan and receiving a salary in yen, then that diversification, outside of real estate, is going to happen by buying ETFs in a foreign currency, which is likely the dollar.
Doing that gradually in a dollar cost average way helps to mitigate the fear of bad timing. As the old saying goes time in the market is usually better than timing the market.
As for the Japan market itself, it’s been doing well lately, but part of that is due to catching up and part of it is just riding the global wave. I don’t think it’s because there’s some amazing story happening here. There may be some amazing individual stock stories but for that you need to be a professional investor. Most people just don’t have the time or mindset for that.
I think the bigger risk for most people right now isn’t being overweight in a country, but rather being overweight in tech because the tech companies are just so big now that regardless of what ETF you buy they dominate. That said some of them are really amazing companies.
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