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00:00WHERE DO YOU SEE THE LEVEL OF THE JAPANESE YEN GOING? WE CONTINUE TO SEE THE RATE DIVERGENCE, BUT SOME PEOPLE SAY THAT THEY ARE STILL BULLISH YEN. GUEST: THANK YOU FOR HAVING ME BACK ON. WE THINK THAT PLEIADIAN CAN STILL WEAKEN -- WE THINK THAT THE YEN CAN STILL WEAKEN. 125 WAS AN APPROPRIATE LEVEL WHERE INTEREST RATES WERE. I DON ' T SEE THE JAPANESE CHANGING THEIR POLICY SOON. SHERY: A WEAKER JAPANESE YEN IS SUPPOSED TO HELP EXPORTERS. DOES THAT MEAN WE ' LL GET A BOOST TO THE EQUITY SPACE? ED: EQUITIES ARE A TOUGH CALL. THERE WILL BE SOME SIGNIFICANT LOSERS, THERE IS NO DOUBT. I THINK IT IS AN SECTOR BY SECTOR BASIS IF YOU WANT TO THINK ABOUT HOSPITALITY, INTEREST RATE, INCOME FLOWS. OTHER AREAS -- TOP INFLATION WILL HIT FOOD, FUEL, THINGS THAT THE JAPANESE IMPORT. IT IS VERY PROBLEMATIC. JAPANESE EXPORTS IS FANTASTIC. IT REALLY SETS UP AN ANALYSIS THAT YOU NEED TO HAVE. HAIDI: WHAT IS THE FEELING WHEN IT COMES TO INFLATION EXPECTATIONS IN JAPAN RIGHT NOW? OBVIOUSLY, THE DOJ IS STICKING TO ITS VIEW THAT ALL OF THIS IN A SENSE IS SUPPLY-DRIVEN AND PERHAPS MORE TRANSITORY THAN THE FED LIKE TO SEE IN TERMS OF THE STICK OF INFLATION AND WAGE INFLATION IN PARTICULAR. WHAT IS THE FED MENTALITY? ED: THERE ARE A COUPLE OF PARTS TO ANSWER THAT QUESTION. THE FIRST PART, WE HAVE BEEN WAITING NOT YEARS, BUT DECADES TO SEE ACTUAL INFLATION COME BACK IN JAPAN? WE HAVE BEEN IN A HIGHLY DEFLATIONARY ENVIRONMENT THAT HAS CAUSED ENDLESS AMOUNTS OF GRIEF, POLITICAL AND SOCIAL AND ECONOMIC LEVELS. I THINK SOME IN JAPAN ARE HAPPY TO SEE THIS PLAY OUT. IF THIS IS THE WAY THAT WE BRING INFLATION, THEN SO BE IT, IN THE MEDIUM-TERM AND THE SHORT-TERM. THE GOAL OF 2% INFLATION FEDERALLY SEEMS TO BE HAPPENING AND IT MAY WELL TAKE HOLD. REMEMBER, IT HAS BEEN DECADES OF ECONOMIC DOWNWARD CYCLES. IN THE MEDIUM AND LONG TERM, OF COURSE, THE BIG QUESTION OF WHETHER WE GO BACK TO THE 1970 ' S SORT OF STAGFLATION. WE ARE NOT A BELIEVER IN THAT. WE THINK THE SITUATION IS WELL-MANAGED AS IT COULD BE RIGHT NOW. PROBABLY THEY WERE LATE TO RAISE RATES AT THE FED LEVEL, BUT IT NOW SEEMS THE WORLD HAS CHIMED ONTO THIS BEING A SIGNIFICANT ISSUE. THE JAPANESE UNIQUELY CAN AFFORD TO SIT ON ONE LEVEL AND BENEFIT FROM EVERYONE ELSE RAISING RATES. THEY CAN AFFORD TO BE SLOWER. HAIDI: THERE IS SO MUCH WHOLESALE SELLING GOING ON AT THE MOMENT. YOUR STRATEGY CURRENTLY, YOU SAY , DO WHAT YOUR GRANDMOTHER ALWAYS SAID. WHAT DID SHE SAY TO DO? ED: [LAUGHS] BUY QUALITY ON SALE. JAPAN IS 25% CHEAPER THAN IT WAS THREE MONTHS AGO. THE CASH FLOWS YOU ARE BUYING ARE PHENOMENAL, THERE ARE BUSINESSES MUCH CHEAPER TODAY THAN THEY WERE THREE MONTHS AGO. SO QUALITY ON SALE, THIS IS A GREAT TIME FRANKLY FOR AN INTERNATIONAL INVESTOR WHO IS THINKING IN THEIR INTERNATIONAL PORTFOLIO TO BE LOOKING AT JAPANESE EQUITIES AND REAL ASSET PURCHASES, AS WELL. SHERY: HOW MUCH MORE COMPETITIVE DOES IT GET TO PURCHASE JAPANESE ASSETS AT A TIME WHEN THE YEN IS LOW AND YOU HAVE COMPETITIVE EDGE WHEN IT COMES TO EXPORTS AGAINST, SAY, SOUTH KOREA OR CHINA? ED: IT ' S A GREAT QUESTION FOR ALMOST THREE YEARS NOW, WE HAVE BEEN SITTING IN JAPAN INSIDE THIS BUBBLE AND NO ONE HAS COME, THEY COULDN ' T AFFORD TO GET INTO THE COUNTRY > > THE JAPANESE GOVERNMENT WAS NOT LETTING PEOPLE ENTER. WHAT YOU CALL THE NORMAL DUE DILIGENCE PROCESS, THE NORMAL REVIEW THAT YOU DO BEFORE COMMITTING MORE CAPITAL HAS NOT BEEN TAKING PLACE. SO HOW MUCH FURTHER DOES THIS HAVE TO RUN? IT ' S AN INTERESTING QUESTION. IT COULD CERTAINLY GET CHEAPER, THERE IS NO REASON WHY WE DON ' T HIT 140 IN THE NEXT MONTH OR TWO IF ALL THE MAJOR PLAYERS ' INTEREST RATES POLICY STAY THE SAME. WHAT DOES THAT MEAN? ASSETS WILL GET CHEAPER, BUT BE AWARE, OTHER PEOPLE WILL BE THINKING THE SAME THING NOW. SO YOU NEED TO FIGURE OUT HOW TO GET INTO JAPAN, AND HOW YOU RATE OPPORTUNITIES. HAIDI: THERE IS A LOT OF TALK ABOUT SUPPORT FOR STARTUPS FOR TECH INNOVATION IN JAPAN AT THE MOMENT. WHAT REFORMS YOU THINK NEED TO TAKE PLACE IN ORDER TO REALLY -- IN ORDER TO REINVIGORATE CORPORATE JAPAN? ED: GREAT QUESTION. WE THINK ABOUT IT EVERY DAY. A COUPLE OF IMPORTANT CHANGES HAVE BEEN TAKING PLACE. IT WOULD BE A 70-80,000,000 DOLLAR VEHICLE FOR MAKING NEW INVESTMENTS AND MAKING A DIFFERENT TYPE OF INVESTMENT ON BEHALF OF REALLY THE JAPANESE GOVERNMENT AND THE JAPANESE PEOPLE. THE CHANGES THAT HAVE GONE ON IN CORPORATE JAPAN TO MAKE JAPAN MORE INTERNATIONALLY COMPETITIVE CONTINUE TO HAPPEN. SOMETIMES A LITTLE BIT UNDER THE SURFACE, SOMETIMES NOT AT ALL, SOMETIMES PUBLICLY. THE CHANGES IN THE STOCK EXCHANGE, THEIR PROMOTION OF GOOD CORPORATE GOVERNANCE, NEED FOR OUTSIDE DIRECTIVES, RUNNING A BUSINESS BETTER, THAT HAS BEEN AN ACTIVE DIALOGUE AND I THINK IT IS GETTING TO A POINT WHERE YOU CAN DO A BIT OF CORPORATE ARBITRAGE TO SEE WHICH COMPANIES ARE BETTER-RUN AND WHICH ARE ADHERING TO FRANKLY MORE FAVORABLE POLICIES, IF YOU WILL, REGARDING ESG, REGARDING CORPORATE GOVERNANCE. AND THAT WILL CREATE AN OPPORTUNITY. THERE ARE VERY IDENTIFIABLE CASH FLOWS IF YOU GO TO THE CORPORATE LEVEL. THIS IS A PLACE WHERE MURPHY ACCOUNTING WORKS.

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Rogers Investment Advisors' Rogers on Strategies for Japan

Ed Rogers, Rogers Investment Advisors CEO & CIO discusses his views on yen weakness and strategies for the Japanese markets. He speaks with Shery Ahn and Haidi Stroud-Watts on "Daybreak Asia". (Source: Bloomberg)

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