This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

How to Bet on Japan's New Boom

Stocks in this article: EWJ DXJ TM NSANY HMC CAJ

NEW YORK ( TheStreet ) -- After languishing for years, Japanese stocks have become red-hot.

During the past year, the Tokyo Stock Price Index climbed 25.0%. Seeing the gains, investors have flocked to Japan ETFs. In the past two months, iShares MSCI Japan Index ETF (EWJ) has recorded more than $1 billion in inflows, while WisdomTree Japan Hedged Equity (DXJ) had $800 million in flows, according to

The rally gained steam as it began to seem likely that Shinzo Abe would win the December election for Prime Minister. Since Abe claimed a resounding victory, stocks have soared.

Investors have applauded the new prime minister because he has pledged to lift Japan out of the stagnation that has plagued the country for decades. In his speeches, Abe has promised a massive spending program to stimulate the economy. He has also called on the Bank of Japan to increase its purchases of government bonds, a process that could lower interest rates.

Can the stock rally continue? Yes, argues Jeremy Schwartz, WisdomTree's research director. Schwartz says that Japanese stocks have reached bargain prices. During the past decade, prices of the Tokyo market fell from 2.5 times book value to about one times book. In contrast, the S&P 500 trades for 2.3 times book. "Even after the rally of the last few months, Japanese stocks are still relatively cheap," Schwartz says.

Part of what makes Schwartz bullish is the weakness of the yen, which has fallen steeply since November. Traders have been dumping the currency because they figure that bond purchases by the Bank of Japan will lower interest rates, a process that would make yen investments less appealing to foreigners.

In the past, Japanese stocks have tended to rise whenever the yen fell. The reason is that a decline in the currency makes Japanese exports cheaper for foreigners. That is an important boost for an economy that relies on many giant exporters, such as Toyota (TM) and Canon (CAJ).

In recent years, the yen has soared as investors sought a safe alternative to the euro and other shaky currencies. The strong currency punished Japanese exporters. But now that the yen is sinking, Japan has emerged as one of the top-performing stock markets in the world.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,601.49 +244.62 1.41%
S&P 500 2,044.96 +32.07 1.59%
NASDAQ 4,718.2260 +73.9140 1.59%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs