Is now the time to hedge Japan exposure?

[dingdong]

I have a fairly large historic holding in:
L&G Japan Index (GBP), annual charge 0.15%, performance in last 12 months 11.5%

and a small holding in:
iShares MSCI Japan GBP Hedged, annual charge 0.61%, performance in last 12 months 19.6%

Given the yen is now at a record 35-year low, and if you decide that you want to take the view that the yen will strengthen in future..... would now be the time to shift from the L&G holding into the hedged fund? Or have I got that completely back to front?

Online advice from different investment banks seems to be inconsistent and I still struggle to get my head round anything hedging related!

[londoninvestor]

A hedged fund would perform its hedging by selling JPY and buying GBP. So if your view is that the yen will strengthen, you'd prefer the unhedged fund.

[Neutrino]

This is about 9 months old:

Investing in Japan:
https://www.youtube.com/watch?v=1MNVx4A31SY

Over the last year, a hedged fund (IJPH) is up about 42% compared to about 19% for an unhedged fund (LCJP).
It is practically impossible to predict exchange rates except with the benefit of hindsight, but perhaps in this case the hedging opportunity has been missed.

[AndrewInDevon]

Thanks for the question....I always get my knickers in a twist when it comes to currencies, despite having a degree in economics....there's something about the duality of considering exchange rates that has just never stuck in my head (ie GBP/JPN or JPN/GBP and the inversion of depreciation/appreciation depending how the rate is expressed....I am an exchange rate dyslectic!

To overcome my blind spot I always do a simple spreadsheet, so your question is timely as I bought into a Japan tracker about a year ago - unhedged. The Yen has depreciated by 15% over the last year, meaning that the sterling value of my investment is down by roughly the same amount, but the market has more than offset that with strong growth so I am still very happy (but not as happy as someone who hedged).

So if you believe the fall of the Yen is about to reverse - the negative interest rate era appears to be over, the BOJ has recently intervened to stop the fall of the Yen against the dollar or the first time in years and UK rates may soon fall - then it would be better to stay unhedged and benefit from an appreciating Yen (or conversely a depreciating GBP)....if that happens, it may not of course!

[dingdong]

Thanks all - that makes a bit more sense now. Glad I'm not the only one that gets my knickers in a twist thinking about this