Source: Wall Street See

After Trump's re-election and the expectation of a "red sweep", the global capital markets were buoyed, and the short-term boost in the Japanese stock market was due to the depreciation of the yen.

According to research reports released by JPMorgan on the 8th, with Trump returning to office, the Japanese stock market will seize an important opportunity due to the depreciation of the yen, expectations of US economic recovery, and the rising risk sentiment in the global markets.

However, in the long run, the impact of Trump's reelection still brings uncertainties, especially the complex effects it may have on global trade, exchange rate policies, and other areas.

Short-term outlook: Yen depreciation boosts the Japanese stock market.

After the news of Trump's victory, the yield on the US 10-year Treasury bond briefly climbed to 4.4%, the USD/JPY exchange rate quickly surged to a high of 154.

Following the announcement, the Nikkei and TOPIX indexes of the Japanese stock market rose, with the financial sector and industries related to overseas demand particularly shining.

JPMorgan analysts pointed out that the U.S. election will have a net positive impact on the Japanese stock market in the short term.

After the results of the U.S. election were announced, long-term interest rates in the U.S. rose, expectations of a rate cut in the U.S. diminished, and the yen weakened against the dollar. These macro conditions are basically favorable for the Japanese stock market.

The depreciation of the yen is beneficial for the Japanese stock market, especially with the positive impact on the profitability of Japanese export-oriented companies due to the depreciation of the yen, the upward potential of the Japanese stock market has been further consolidated.

However, if the yen weakens further against the dollar, and even rises to the level of 160 yen in the short term, this could be a "double-edged sword".

JPMorgan believes that on the one hand, the depreciation of the yen will boost the competitiveness of Japanese export-oriented companies.

On the other hand, it may also bring pressure on the price level and real wage growth in Japan. If Japan's CPI growth exceeds expectations, it will bring pressure to the domestic consumption market, weakening residents' purchasing power. This will have a negative impact on domestic demand in Japan.

Long-term outlook: Can the Japanese stock market continue its upward trend with the strong performance of the U.S. economy?

In the long term, JPMorgan expects that if Trump is re-elected, it will further strengthen the U.S.'s global economic dominance, further promote the "American exceptionalism" becoming a reality, meaning the strong performance of the U.S. economy and stock market will have spillover effects globally.

In this situation, the benefits of the Japanese stock market are mainly manifested in two aspects: stable growth in overseas demand and increased Japanese export competitiveness due to the relative depreciation of the yen.

However, JPMorgan analysts also caution that the uncertainty in the future relations between the USA and other major countries may bring pressure to some Japanese companies that rely on exports. In particular, if the Trump administration continues to impose tariffs on other countries and strengthen regulations in the future, Japanese companies with a high proportion of exports such as fibers, textiles, mining, and non-metals may be negatively affected.

Furthermore, Trump's policies may bring structural benefits to defense-related Japanese companies, while industries primarily driven by domestic demand, such as the IT services sector, are also expected to maintain stable growth.

Editor / jayden