Jesper Koll, a senior investor who is still optimistic about the Japanese market, said that the adjustment of the yen and the unwinding of carry trades are positive developments for Japan.
Cole, director of experts at Monex Group, said in an interview with CNBC's “Squawk Box Asia”: “This forces investors to look at the real Japanese strategy… not just quick carry trades, borrowing at near-zero interest rates in Japan and investing in high-end Risk assets.
Yen carry trades began unwinding last week as the yen strengthened as the Bank of Japan raised interest rates and led to a sharp sell-off in global markets.
“I actually think the big, sharp correction that happened last week was actually quite healthy,” Cole said, adding that the yen's weakness was responsible for the Nikkei's record high.
USD/JPY
“Pricing money is the right thing to do. An economy running at zero interest rates, an economy with central banks leading government debt purchases, that's not how capitalism is supposed to work,” Cole added.
Former European Central Bank President Trichet also told CNBC last week that the adjustment of the dollar against the yen was “long overdue” and could be “healthy” for the market.
Koll said that as much as 75% of yen carry trades may have been unwound, although the total size of the carry trade has not yet been reliably determined.
Japan's Nikkei 225 stock index rebounded sharply following its historic decline early last week. It rose as much as 3% on Tuesday.
Kerr said financial markets were more worried about a U.S. hard landing and a collapse in U.S. two-year Treasuries than a move by the Bank of Japan to raise interest rates.
Nikkei 225 Index
Uchida ShinichiThe deputy governor of the Bank of Japan said last Wednesday that the bank needs to maintain monetary accommodation at current policy rates in the face of global volatility.
However, the day after Uchida’s statement, the Bank of Japan released a summary of its monetary policy meeting, showing that the Bank of Japan is willing to Policymakers raise interest rates further.
Cole predicts that the Bank of Japan will not remain cautious for too long and will soon continue normalizing interest rates, with the policy rate likely to be around 1.5% by this time next year.
This will help shift the focus from Japan's previous “bubble economy” caused by long-term maintenance of near-zero interest rates to the domestic economy, he said, adding that corporate restructuring and continued real wage growth provide bullish reasons for Japan.
Real wages in Japan increased by 1.1% year-on-year in June, the first increase in 26 months.