Yields on benchmark 10-year Japanese government bonds are now hovering around 0.05%, compared to trading in the negatives for most of year. Higher bond yields make it more profitable for banks to issue loans.
Financial stocks have also strengthened globally after Donald Trump won the U.S. presidential elections as traders anticipate the Trump administration would back softer regulations on the financial sector and may even scrap Dodd-Frank.
Furthermore, since Trump’s win, the U.S. dollar has strengthened on the improving U.S. economic outlook and rising interest rate expectations, with the USD breaking through 115 yen on Friday. The stronger dollar or weaker Japanese yen also improved the outlook on the Japanese economy, which has a large export industry.
Moreover, the weakening yen currency has allowed currency-hedged Japan ETFs outperform non-hedged Japanese equity funds.
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