Japan: Can the long equity/short yen trade work once again?

Shorting the Japanese yen while going long equities was a consensus trade last year. The pair have decoupled, but can the trade work again? Tilney Bestinvest's Sophie Muller investigates.

There has long been a strong, negative correlation between Japanese equities and the Japanese yen. This relationship intensified last year following the introduction in April of the Bank of Japan’s aggressive Quantitative and Qualitative Monetary Easing (QQE) programme as part of the reform package dubbed Abenomics. Indeed, one of the major consensus trades of last year was buy Japanese equities, sell the currency. This trade was very beneficial for a lot of investors, as the Topix 150 index surged, increasing by 54% in local currency terms for the whole of 2013, while the yen weak...