CNBC International Live Sep 18, 2026
With Timothy Moe, Chief Asia-Pacific Regional Equity Strategist at Goldman Sachs
Goldman Sachs has raised its forecast for Japanese earnings growth this year from 13% to 19%. On Timothy Moe's rough metric, 10 yen of currency appreciation would take about 4% off that local-currency number.
The question put to him was whether higher Japanese interest rates and a moving exchange rate end the case for owning Japanese equities. Moe's answer separates the two. The earnings are the reason to own the market; the currency decides what a dollar investor actually collects.
"So, we've been overweight Japan. Happy we have been."
Moe is Goldman Sachs' chief Asia-Pacific regional equity strategist, and he had spent the first part of that week in Bangkok talking to Japanese chief executives about the exchange rate.
The full segment is covered here so you can skip it.
Here are the 6 predictions that matter.
Key Takeaways
Goldman raised its Japanese earnings growth forecast for this year from 13% to 19%
Korea is the region's best performer this year and Taiwan second by a wide margin, with Japan and Singapore in the low to mid 20s in dollar terms
A dollar investor has already banked a windfall from the yen going from 164 to about 154 or 155
Moe's rule of thumb is that 10 yen of appreciation costs about 4% of local-currency earnings on a one-year view
A 25bp rate rise cannot fix an oil and food shock, because the pressure is on the supply side
He is still structurally bullish, with choppy to down markets in September and October before the region regains momentum
1. Overweight, and It Worked
The host asked how far Bank of Japan normalization, higher interest rates and the swings in the exchange rate could derail the case for Japanese equities.
The host asked whether the story is over
So, Bank of Japan normalization, higher interest rates, the vagaries of the exchange rate, to what degree could that derail, will it derail, the Japan is back narrative.
A host
Moe set out the position before the changes to it. Japan has oscillated with Singapore between third place and best in the region this year.
Goldman has been overweight and is pleased about it
So, we've been overweight Japan. Happy we have been.
Timothy Moe
The regional scoreboard puts Korea first
Korea's number one, Taiwan's number two by long shot, but then kind of low to mid-20s, you have Japan and Singapore.
Timothy Moe
And the returns are measured in dollars
So, Japan has actually done very well. That's in US dollar terms.
Timothy Moe
2. Earnings Went 13% to 19%
What has driven those returns, on Moe's account, is the inflation trade feeding through to company profits rather than a re-rating.
The Japan inflation trade is an earnings trade
And our view there has been the Japan inflation trade that's driving earnings.
Timothy Moe
He said second-quarter delivery was very strong, and that it was not only a Japanese phenomenon: the S&P 500, Europe and the rest of Asia reported the same way.
Earnings are what moved every equity market this year
Really, earnings have been the key story propelling equity markets this year.
Timothy Moe
So Goldman lifted its Japan number
And we've recently raised our numbers from 13% earnings growth this year to 19%. So that's a good number.
Timothy Moe
Valuations, he said, sit toward the upper end of their range without being extreme, which leaves earnings as the main force behind the market.
3. The Yen Windfall, in Dollars
Then he turned to what has changed. His frame is the dollar-based investor, because that is the common denominator for the global audience he writes for.
Expectations should be lower in the near term
In terms of deltas here, I think it's fair to say that we should have a somewhat more subdued set of expectations in the near term.
Timothy Moe
The currency has already handed over a gain
You've just had a windfall with the yen appreciating from 164 to kind of 154 55 or thereabouts now.
Timothy Moe
4. A 25bp Hike Can't Fix Oil
Set against that gain are the same worries about higher rates and affordability that the United States has, arriving in Japan. Moe's objection is that the inflation is not the kind a policy rate reaches.
A quarter point does not touch a supply shock
And it's not clear that raising rates just by 25 basis points will address all that because a lot of it supply side shock oil food etc.
Timothy Moe
Tighter money is the wrong instrument for it
Those are supply issues not necessarily handleable by slightly tighter interest rates.
Timothy Moe
The other worry he named is the possibility of more forceful fiscal policy from the Japanese government, and how that would feed into short and long Japanese government bond yields and from there into the currency.
5. Three Currency Scenarios
Moe laid out what each path does to a dollar investor's return. A yen that slips back takes some of the dollar gain with it while the underlying earnings grind higher. A yen that does nothing leaves the market trading in a range. Further appreciation improves the dollar return but puts the earnings forecast under question.
The metric is 10 yen to a cut in earnings
But then you start to call into question how much you might have to cut the local currency earnings because the rough metric is that for every 10 point move in US dollar Japanese yen on a one-year perspective, you would reduce earnings.
Timothy Moe
Which he sized at about 4%
If the currency appreciates, in other words, you go from like 165 to 155, you would reduce earnings by about 4%.
Timothy Moe
He was careful that this is a one-year measure, so the currency has to hold the new level for the effect to arrive. What he expects is that the market starts to doubt the number before the number changes.
The 19% forecast is what gets questioned
But my point is I think the market would start to say maybe that 19% earnings growth might cut it down a little bit.
Timothy Moe
All three paths, in one line
So I think if the yen weakens you get immediate hit. If it stays stable you're kind of in a trading range and if it appreciates you're going to bring into question, well, you might have to cut the earnings.
Timothy Moe
6. Still Structurally Bullish
Asked whether Japan is a market to buy on the dip, and whether the way in is the one Warren Buffett took through the trading companies and the banks, Moe gave the structural answer.
The host asked for the bottom line
So ultimately is Japan a buy on the dip market
A host
He is still bullish on a multi-year view
So if you want a bottom line I think yes we still are bullish structurally on Japan.
Timothy Moe
Japan left deflation only a few years ago
We still think we've come out of these — two or three decades of deflation — in just the last few years.
Timothy Moe
And there is more of that to run
There's still more to go in that.
Timothy Moe
The politics are settled
We think we've got political stability.
Timothy Moe
And the policy agenda holds up
And we think we've got a policy agenda that makes sense
Timothy Moe
The offset is the one he had already named: rates normalizing at the same time as supply-side price pressure. That is why his near-term call is choppy to down markets through September and October, for Japan and for the region, before the earnings reassert themselves.
Then the earnings take over again
But then we think, as you go through time and the earnings continue to come through then we think that markets regain their momentum and I think that's true for Japan as it is we think also for Korea, Taiwan and for example China, Asia.
Timothy Moe
Bonus Insights
Japanese chief executives want a level, not a direction
Moe had spent the first part of that week in Bangkok with Japanese chief executives, and the table's observation was that those companies are asking for a stable exchange rate rather than a strong or a weak one, because their businesses sell abroad and have to plan around whatever the rate is. One globally recognized Japanese consumer brand came up as the example.
The yen trade was framed as buy the rumor, sell the fact
The currency question was put to Moe as a positioning one: whether the move in the yen ahead of the Bank of Japan decision reverses if the governor turns out less hawkish than the market has priced.
Moe's bottom line is that Japanese earnings, not the yen, are the reason to hold the market, and that a dollar investor should expect a choppy autumn while the currency decides how much of that earnings growth survives translation.
Products, Companies & Tools Mentioned
Goldman Sachs (Moe's firm and the source of the overweight Japan call, the 13%-to-19% earnings revision and the 10-yen-to-4% rule of thumb)
The Bank of Japan (Normalizing rates into a supply-driven inflation that Moe says a 25bp rise cannot address)
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