How to Get Mt. Fuji-Sized Returns from Japan

The cherry blossom trees that Japan gifted to the United States a century ago are blooming in Washington, D.C. And although the flowering cherries are reaching the peak of their bloom, I believe that Japan-focused companies have a long profit season ahead of them.

Japan’s turnaround story is nothing short of remarkable. It’s been just over a year since the triple disaster that devastated its economy and industry. But despite an earthquake, a tsunami and a nuclear meltdown, the country is making a miraculous recovery.

Although the country has made a great deal of progress, there’s a tremendous amount of work to be done ... and, for investors, gains to be made.

3 Reasons to Jump on
the Opportunity in Japan

Three data points in particular tell me that Japan is now worthy of a closer look from investors searching for profits in Asia.

First, big Japanese manufacturers have just turned optimistic about business conditions for the first time in four months. The Manufacturer Sentiment Index jumped 13 points in March, the biggest increase in more than 2-1/2 years.

Second is the surprising trade surplus that Japan recorded in February. The turnaround was due to the fact that exports declined by just 2.7%, versus the 6.5% decrease that the Wall Street crowd was expecting.

The third positive piece of news is the recent weakness in the yen. Back in October, the Japanese currency reached a post-World War II high of just over 75 yen to the dollar. That strength made it very difficult for Japanese exporters to compete against international rivals such as China and South Korea.

Since then, the Bank of Japan has instituted two rounds of quantitative easing, intervening directly in the currency market to weaken the yen. And it’s working. The yen has dropped 7% against the dollar since February, making Japanese exports cheaper to overseas buyers.

As the yen has declined, Japanese stocks have surged. The benchmark Nikkei 225 is up roughly 10% for the year, nearly double the return of the iShares China 25 index.

For U.S. investors, it’s not hard to take advantage of the Japanese turnaround, because many of the country’s best stocks are traded on the New York Stock Exchange and the Nasdaq.

They include the auto giants Toyota (TM) and Honda (HMC), both of which are up by almost 30% this year ... equipment makers like Komatsu (KMTUY.PK) and Fuji Heavy Industries (FUJHY.PK) ... financial services providers such as Sumitomo Financial (SMFG) and Nomura (NMR) ... and electronics heavyweights Sony (SNY) and Canon (CAJ).

If you prefer ETFs, you can consider the iShares MSCI Japan Index Fund (EWJ), the iShares MSCI Japan Small Cap Index (SCJ) or the WisdomTree Japan Total Dividend (DXJ).

I’m not suggesting you rush out and buy any of these tomorrow morning. As always, timing is everything, so I recommend that you wait for my buy signal in Asia Stock Alert. But if you’re looking for Mt. Fuji-sized opportunities, Japan should be on your radar screen.

Best wishes,


P.S. 2012 is shaping up to be a seriously profitable year for my Asia Stock Alert members. They just captured a nearly 55% gain in a big-name stock that's benefiting from even-bigger overseas demand. And with countries like Japan offering similar Mt. Fuji-sized opportunities, there's never been a better time to take my service for a risk-free test drive!

P.P.S. For even more explosive investing opportunities with an international flavor, check out my colleague Ron Rowland’s brand-new video presentation that just went online. In it, he uncovers some corners of the market that are beating the S&P 500 by as much as 9-to-1! Just click here to watch it now.

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Posted 03-30-2012 3:42 PM by Tony Sagami
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