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Next Stop for Investors, The Land of the Rising Sun

April 22nd, 2013

japanFor decades pundits have been claiming Japan’s “zombie” economy was here to stay; nothing could be done to revive it or the moribund stock market. Fast forward to 2013. A new government installed in Tokyo and unprecedented central bank stimulus created a nice run-up in Japanese stocks. In fact, the G-20 group of major economies over the weekend praised Japan’s monetary policies as supporting domestic demand (and not as a devaluing of the currency), giving the Nikkei another 2% boost on Monday.

Wall Street hasn’t ignored these developments. Goldman Sachs recently upped their 12-month target for the benchmark NIKKEI 225 (INDEXNIKKEI:NI225), seeing a 20% gain push the index to 16,000. As U.S. stocks seesaw a bit in the early spring, investors are betting Japan could be the place to find some gains. With the money supply pumping, a weakened Japanese Yen (¥) / US Dollar ($)(JPYUSD) has helped jumpstart Japanese stocks. The magical 100yen/US Dollar ($) / US Dollar ($) (USDUSD) “parity” mark is approaching fast, and Jonathan Krinsky, chief technical market analyst of Miller Tabak, sees it happening soon.

“I think [the yen] ultimately does get through [100 yen/dollar],” he says, “and when you look at a long term chart of the dollar/yen, it’s actually breaking a 25 to 30 year downtrend, so there are a lot reasons to think it could get much weaker versus the dollar.” The sliding Yen has given way to the Nikkei’s rebound, to the tune of 25% in the past 3 months. Krinsky sees this trend holding for some time.

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Related: CurrencyShares Japanese Yen Trust (NYSEARCA:FXY), WisdomTree Dreyfus Japanese Yen Fd (ETF) (NYSEARCA:JYF), iShares MSCI Japan Index (ETF) (NYSEARCA:EWJ)


NYSE:EWJ, NYSE:FXY, NYSE:JYF


 

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