Five Sector Funds You'll Need in 2007

I think this is the result of a market strike against the Bank of Japan. The bank has so far refused to raise interest rates after its quarter-point increase in July. Its announcement after taking no action at its Dec. 19 meeting suggested that it won't raise rates in January, either.

The Bank of Japan is afraid of tipping the economy into a recession. But the financial markets want higher rates now, or investors will take put their money into euros and even dollars. I think a recent string of weak economic data has spooked the Bank of Japan, but the Japanese economy is stronger than it looks. I'm anticipating that the bank will raise rates later in the year, and that will lead to a yen rally against the dollar that will spill over into the stock market.

When: I'd buy now and into January with the possibility that the yen could drop a bit more after the new year. I'd hold through the next interest rate increase by the Bank of Japan and look for signs that the market is getting impatient again at the slow pace of change in the fall.

What: iShares MSCI Japan Index(EWJ Quote) gives you exposure to all the big exporters in the Japanese economy. That gives you two ways to profit: First, a weak yen makes Japanese exports cheap and helps sales and, second, a rallying yen will drive up the prices of these stocks.

New Developments on Past Columns

"Profit When Oil's Have-Nots Crash": The $30 billion deal that puts together Norwegian oil companies Statoil(STO Quote) and Norsk Hydro to create one national energy champion puts more pressure on the world's other oil companies to get bigger. (As if they needed any more pressure, facing as they do rising exploration and production costs and increasing difficulty in big enough pools of new oil to keep reserves and earnings growing.)

Wall Street is looking for more acquisitions in the sector. Names of potential acquisition candidates that have come up in Wall Street rumors are EnCana(ECA Quote), Suncor Energy(SU Quote), XTO Energy(XTO Quote) and Devon Energy(DVN Quote).

At the time of publication, Jim Jubak owned or controlled shares in Devon Energy and XTO Energy. He does not own short positions in any stock mentioned in this column.