Japanese stock market welcomes a bountiful year, but US dollar investors have reaped little.

In 2024, the Japanese stock market had a glorious year, but for U.S. investors, the situation was completely different. The benchmark Nikkei index hit a historical high in 2024, with a gain of about 15%. However, due to a sharp drop of about 10% in the yen against the U.S. dollar, the Nikkei index's gain in U.S. dollars was only 3%. This was far below the gains seen in global peers, with the S&P 500 and Hang Seng H-Share Index ETF both seeing gains of over 25% in U.S. dollar terms. Although the depreciation of the yen boosted profits for exporters, and the Bank of Japan raising interest rates supported financial stocks, limited net inflows of funds this year indicate that the weakness and volatility of the yen have deterred foreign investors. Rising import prices and inflation pressures have also put pressure on the Japanese economy. In U.S. dollar terms, the Japanese stock market lagged behind its global peers. This trend is likely to continue in 2025, as doubts arise among traders about the speed of narrowing interest rate differentials between the U.S. and Japan following policy meetings of their respective central banks, reducing bets on the yen appreciating. Amir Anvarzadeh, Japan stock strategist at Asymmetric Advisors Pte, said, "Foreign investors have put a lot of money into Japan, but the results have been disappointing." He stated that signals recently sent by the Bank of Japan have "caused significant damage to the yen, pushing up import prices and forcing foreign investors to hedge more exchange rate risk when investing in Japan."