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Rogers Investment Expects ‘Short-Term Dislocations’ in Yen

Ed Rogers, chief executive officer at Rogers Investment Advisors K.K., a Tokyo-based fund-of-hedge-funds adviser, comments on the outlook for investments in Japan following an earthquake on March 11.

Rogers made the comments in a Bloomberg Television interview in Hong Kong today. He estimates rebuilding following the temblor and tsunami will amount to more than $200 billion.

On a strengthening yen as the nation taps its reserves to rebuild:

“The short-term dislocations are going to be acute. We’re seeing the Nikkei down 11, 12 percent in the last two days. We’re probably not at the bottom. Will I view this as a buying opportunity, yes I would. Let’s look at corporate Japan, what numbers are going to be reported for the full year, look at the coffers, they’re filled. Corporate Japan has cash on their balance sheets.

“This is the sort of situation where the repatriation of the yen is almost unavoidable in the short term, and the foreign exchange dislocations will be acute, but in the long term, this will lead to a stronger, better rebuilt Japan, and that situation will normalize.”

On investments in Japan:

“The economic engine of Japan is primarily unscathed in this. So you just get ‘long’ Japan. Call options on the Nikkei would be one way of doing so.”

The affected area “is less than 10 percent of Japan’s total industrial capacity. There are no major ports affected. The nuts and bolts of industrial Japan Inc. are by and large going to be unaffected by this. There will be short-term dislocations to be sure, but the medium- and long-term outlook is pretty much unaffected.”

On the outlook for government bonds:

“In the short term, there will be a flight to quality if you will. People unwinding equity positions, people trying to figure out exactly how bad it is. You’re still trying to get your arms around the key question of how bad could this nuclear reactor problem get and what would be the effects. Most of the commentary implies that even the worst case scenario is not going to end Japan Inc. or Japan as a country and we ought to keep that in mind as we get through this.

“There’s no silver lining for an event like this. But some of the positive outcomes may be if the Japanese government, if they handle this well, this could be their Katrina moment. Great disasters, great challenges, if they’re met with a great response, will lead to a very, very positive outcome for Japan in the medium and long term.”

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