(This is an excerpt from an article I originally published on Seeking Alpha on January 22, 2012. Click here to read the entire piece.)
Via an extremely strong Japanese yen, the world is offering Japan a steep discount on its assets. On January 19, 2011, Japanese Finance Minister, Yukio Edano, seemed to indicate that Japan may finally be ready to take full advantage of its highly treasured currency by increasing overseas investments and, most importantly, buying up commodities:
{snip}
To this end, the Finance Ministry plans to boost funding for government-supported investment groups and expand the kinds of assets they can buy…{snip}…
Edano made it clear that he wants private industry to get more aggressive as well…{snip}
It is not clear whether this investment strategy will replace the Ministry’s efforts, along with the Bank of Japan, to intervene in currency markets to weaken the yen. However, a buying spree seems like a much more productive use of a strong currency. {snip}
In anticipation of more interventions, I have maintained a bearish bias against the yen, now mostly in USD/JPY – also see Rydex CurrencyShares Japanese Yen (FXY). Currency traders seem to be slowly swinging toward this bias as well. According to Reuters in “Dollar’s detractors may be missing its comeback,” some significant changes are underway in the positioning of traders…{snip}…
…an important turning point in a lasting trend is potentially developing…{snip}…This may also be the time to start nibbling away at beaten up Japanese stocks like Toyota Motors (TM):
Source for charts: FreeStockCharts.com
Be careful out there!
(This is an excerpt from an article I originally published on Seeking Alpha on January 22, 2012. Click here to read the entire piece.)
Full disclosure: net short the Japanese yen