Japan Could Be Opportunistic

By Kevin Grewal

The world’s second largest economy has been struggling to get back on its feet and emerge from its worst recession since World War II. However, recent data suggests that Japan’s economic recovery efforts are finally starting to reach households and its economy could finally be starting to stabilize paving the road to opportunity. 

According to Japan’s Ministry of Economy, Trade and Industry, consumer demand and spending has been on the rise.  Higher demand for automobiles, energy and machinery has pushed retail sales up in February, marking the second straight month of increases, and nearly 4.2%. 

In fact, despite negative publicity and suspension of U.S. production for five days, the world’s largest automaker, Toyota Motor Corporation (TM), boasted an increase in production in nearly all of its regions.  In fact, Toyota boosted output 83% from a year earlier and February was the seventh straight month the automaker has witnessed jumps in production.

This trend has further trickled down to automakers Honda Motor Company (HMC) and Nissan Motors.  Honda is boasting production increases of nearly 49% from a year earlier and Nissan’s production is up nearly 72%. 

Other major Japanese corporations are seeing the light at the end of the tunnel as well.  Japanese telecommunications giant, Nippon Telegraph and Telephone Corporation (NTT), recently boasted increases in quarterly revenue of 2.4% and an increase in its operating margins to 11.9%.  

Other factors that are indicative that recovery efforts are hitting households include unemployment rates falling to a 10-month low of 4.9%, a slowdown in declining wages and a boost in consumer confidence. 

Some equities to capitalize on this trend which enable one to gain diversified exposure to Toyota, Honda, Nissan, Nippon Telegraph and other major Japanese companies include

  • the iShares MSCI Japan Index Fund (EWJ)
  • the iShares S&P/TOPIX 150 Index Fund (ITF)
  • the WisdomTree Japan Total Dividend Fund (DXJ)

Although it appears that Japan’s economy is heading in the right direction, it is equally important to consider concerns of strong deflationary pressures which continue to loom over the Asian region.  After all, the country’s core consumer price index dropped for the twelfth consecutive month.

A good way to protect against this risk, and the inherent risks that come with investing in equities, is through the use of stop losses or an exit strategy which identifies price points at which upward trend could come to an end.  Such a strategy, which identifies these price points based on market volatility and changes on a daily basis, can be found at

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