Japanese Investors Flee to American Equities

Investors in the USA may be shying away due to the fiscal cliff failure, but that isn't stopping Japanese investors.

In fact, they just poured $2.3 billion into U.S., Canadian, Mexican and other American stocks through one of the newest listings on the Tokyo Stock Exchange as it launched.

The Nikko Gravity Americas Fund allocates 64% in U.S. shares, 14% in Mexican shares, 10% in Canadian shares and the rest split amongst Latin American countries including Columbia and Brazil.

The largest allocation in the fund is 20% for the energy sector, followed by 15% in financials and 15% in information technology.

Cash-rich Japanese bought in because of strong potential U.S. economic growth and a recent rise in the dollar against the yen.

The yen is poised for a drop of more than 11% versus the dollar in 2012 alone. The new government formed by Prime Minister Shinzo Abe is widely expected to further weaken Japan's currency and implement aggressive stimulus.

In spite of similar easing efforts in the U.S.A., the yen hit a two-year low against the dollar right after the new Japanese government formed.

According to Bank of Japan data, Japanese investors hold a relatively massive $17.5 billion in personal assets. 57% of the assets are held in low-yielding bank and postal savings and less than 4% is invested in mutual funds.

The incredibly low interest rates and yields from these investments guarantee that Japanese investors will lose wealth if they do not find suitable alternatives. With few strong domestic prospects, easy access to American markets and growth potential is about as good as it gets.

It just goes to show that while investing in the U.S.A. has been risky, it hasn't gotten as bad as it has in Japan. At least not yet.