Strategic Investment Report for Individual Investors Amid Global Uncertainty

Introduction

As of 2025, the global economy faces a dual challenge of geopolitical risk and structural low growth. With escalating tensions in the Middle East, intensifying U.S.-China economic decoupling, stagnation in Europe, and rising energy prices, individual investors must adopt swift and flexible strategies. This report focuses on the role of cash holdings and presents scenario-based strategies to manage uncertainty effectively.

Significance of Increasing Cash Allocation

Merits:

Liquidity Reserve: Enables immediate response to market corrections through tactical buying.
Volatility Buffer: Lowers overall portfolio volatility and provides psychological stability.
FX Flexibility: Allows for opportunistic foreign investment during yen appreciation.

Demerits:

Inflation Erosion: With inflation exceeding 2%, cash value erodes in real terms.
Opportunity Cost: Potentially misses growth opportunities in trending markets or sectors.

Investment Strategies by Scenario

Scenario	Economic Environment	Strategic Focus	Recommended Assets
Baseline (2.5–3% growth)	Modest growth, stable inflation	Global diversification, income stability	Global equity ETFs, dividend stocks, Japanese bonds
Inflation Shock (e.g., Middle East conflict)	High energy prices, import inflation	Inflation-resistant assets	Commodity ETFs, TIPS, infrastructure equities
Recession (esp. in Europe)	Weak consumption and investment	Safe-haven allocation	Long-term government bonds, gold, defensive equities
Geopolitical & Tech Decoupling	Fragmented supply chains	Thematic and regional allocation	Emerging market funds, defense/AI/water resource equities

Recommended Portfolio Structure (Model Case)

Assumptions: ¥10 million portfolio / Medium risk tolerance / Mid- to long-term horizon

Asset Class	Allocation	Purpose
Global Equity ETFs (e.g., VT)	30%	Capture global growth
Japanese Stocks (high dividend/value)	10%	Domestic stability, yen hedge
Gold & Commodity ETFs	10%	Inflation hedge, value store
Bonds (TIPS, developed gov’t bonds)	20%	Downturn protection
Real Estate CF / REITs	10%	Income generation + inflation protection
Cash / MMF / Short-term Gov’t Bonds	20%	Liquidity reserve for tactical deployment

Tactical Use of Cash: Rules & Triggers

Staggered Investment Rule: Deploy 10% of cash if equities fall 15%, remaining 10% if >20% decline.
FX Sensitivity: Buy U.S. ETFs if USD/JPY strengthens to 135 or lower; avoid foreign bonds during yen weakness.
Monetary Policy Monitoring: If a Fed pivot becomes apparent, reduce cash to 10% and reallocate into equities.

Conclusion

Cash should not be treated merely as a “safe asset” but as a strategic reserve in times of volatility. In an era of heightened global uncertainty, maintaining cash as dry powder enables tactical maneuvering and flexibility across divergent economic scenarios. For individual investors, building a scenario-resilient portfolio with dynamic cash utilization is the key to long-term financial stability.