Investors need to be very careful about investing in risky assets as markets remain in a state of "heightened alert", said Simon Warner, head of macro markets at AMP Capital on CNBC's Protect Your Wealth.
"Euro-yen, I do think, is a key barometer and lots of things are breaking down. Nikkei's breaking down, euro-yen's breaking down... euro-dollar is in a very important level," he said.
Japan markets have been under pressure after the Japanese yen hit a 15-year high against the U.S. dollar earlier this week, and a 9-year high against the euro.
Dismal U.S. housing and durable goods data have fueled worries about the global recovery. The resulting risk aversion has prompted investors to unwind their carry trade positions, forcing the yen to appreciate.
A strengthening yen tends to be negative for Japanese exporters.
"Credit is better than equities in that regard," Warner added.
To cope with the stronger currency, Warner said Japan needs to continue to deploy more of its assets off-shore.
"They've got their asset basis still largely skewed towards domestic fixed income products, and they're continuing to move that off-shore. I think they should continue to do that."
Catch "Protect Your Wealth" on CNBC's Asia Pacific network every Tuesday on "CNBC's Cash Flow," Wednesday on "Asia Squawk Box" and Thursday on "Capital Connection."