Concerns about yen depreciation intensify: Japan's wealthy class is still not prepared to bet on an increase, UBS reveals deep concerns

Newspaper (Asia Pacific) News - Bloomberg reported on May 15th that although US President Trump's trade policies have caused severe market volatility and made some investors optimistic about the possibility of yen appreciation, the wealthiest population in Japan remains cautious and has not shown a consistent bullish signal.

According to Daiju Aoki, Chief Investment Officer of UBS SuMi Trust Wealth Management in Tokyo, this phenomenon is closely related to Japan's past economic trauma. Many high net worth families have not yet got rid of the psychological shadow brought by the bursting of the asset foam in the early 1990s, which led them to prefer to hold cash rather than buy yen related assets even in the face of inflation erosion.

We have observed that many wealthy customers are extremely anxious about the continued depreciation of the yen, "Aoki said in an interview." If the Japanese economy continues to be sluggish and capital investment is insufficient, there is a possibility that the yen may fall to 180 or even 200 against the US dollar in the future. "Although Trump's unpredictable trade policies have disrupted exchange rate fluctuations in the short term, Aoki believes that it is not impossible for the yen to reach these low levels in the next economic cycle.

Recently, the yen has continued to weaken, reversing the strong trend of Trump's early presidency. Especially on Monday of this week, due to the temporary suspension of tariffs by both China and the United States, the short covering of the US dollar caused the Japanese yen to plummet by more than 2% in a single day, approaching the 150 mark at one point.

If the Japanese yen depreciates to 180 or even 200 against the US dollar, it will return to the historical low of the mid-1980s. The last time the Japanese yen was at this level was shortly after the Plaza Accord came into effect in 1986, which aimed to lower the exchange rate of the US dollar against major currencies in order to improve the US trade deficit. However, the rapid appreciation of the yen led Japan to introduce large-scale stimulus measures and triggered an asset foam. The foam burst in 1990, which had a long-term impact on the Japanese economy.

Although the main indexes of Japanese stock market have returned to the level before the foam, the structural changes behind them still make the rich groups keep alert. They are concerned that the depreciation of the yen to a historical low will not only affect asset allocation, but also reflect the continued weakening of the country's economic potential.

Japan, once regarded as a global economic powerhouse, had a dominant position in its electronics and automotive industries. However, in the current global landscape, Japan is facing multiple challenges such as an aging population and insufficient innovation momentum. On the other hand, the United States and China continue to lead in technological and industrial innovation.

Since the mid-1990s, Japan has long faced the problem of stagnant inflation. However, as inflationary pressures in major economies around the world gradually weaken, the price level in Japan has begun to rise, further compressing the actual value of cash held by the wealthy class.

Aoki added, "For many of our clients, the lack of economic innovation and population growth support in Japan is their biggest concern. This structural instability has led them to maintain a conservative attitude towards the future trend of the yen and the overall Japanese economy