Let's be honest. Normally, the average stock trader isn't much
concerned with what's going on with the yen or Japan for that
matter. There are plenty of domestic stocks that don't require
you to have in-depth knowledge of a country that sits on the
other side of the world but there might be an investment in this
story. Here's a little background to get you started.
Over the past couple of decades, Japan has felt like the
country that can't win. It went through some rough times but then
entered a period of growth. Just when the country seemed to be
back on its feet, the country was brought to its economic knees
when stock and property prices plunged. (Sound familiar?)
The Japanese government did what the U.S. did and embarked on
quantitative easing. Once the program ended, the economy, once
again, began to sink prompting the program to be reinstated.
Things got better and then came the massive earthquake, tsunami,
and nuclear meltdown.
Newly re-elected Prime Minister, Shinzō Abe is taking the, "go
big or go home" approach to what has become a deflationary
economy. More QE but on a massive scale. David Houle, a Certified
Financial Analyst with
says, "Japan has embarked on a quantitative easing program that
is three times the size of ours when measured relative to the
size of the economy. Their intent is to spark mild but stable
inflation and economy growth. One of the impacts is a weaker
And it's an impact that the Japanese government endorses. A
weaker currency, in theory, lowers the cost of Japanese exports
which should increase demand. This should breathe life into the
economy just as it has in the U.S.
If you've watched the financial media lately, you know that
the weakening yen has been the currency story du jour and while
some believe that Japan will soon put the breaks on the weakening
yen, many still believe that there's money to be made.
One way is to continue shorting the yen. Another is to go long
Japanese companies. Examples include Honda (NYSE:
), Sony (NYSE:
), and Toyota (NYSE:
). We aren't recommending these to buy but instead, to get your
Finally, an ETF. One like the WisdomTree Japan Hedged Equity
) or ProShares UltraShort Yen (NYSE:
) if you're looking for a levered play. (Warning: Levered
can be extremely volatile. Use with caution.)
Finally, the Japan story, much like in the United States, is
likely to be a multi-year opportunity. If QE does for Japan's
markets what it has done for the United States, a long-term
investing strategy appropriately balanced in your portfolio could
Disclosure: At the time of this writing, Tim Parker had no
position in any of the products listed.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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