Support for Japanese Exporters
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You all might have missed it in the inaugural din these last few days, but the Japanese Central Bank, their equivalent of our Federal Reserve, took a surprising action. The governors over there decided to shift policies radically, begin inflating the yes and promote exports to bring about economic growth. That's a huge shift from the traditional austerity that the bank has practiced during Japan's hard times.
I think the reasoning here is that austerity in Japan hasn't worked to move the country out of its doldrums. That may be the case, and if so, a new approach is called for. Whether this will be the case remains to be seen. I'll be interested to watch what happens.
The bank has promised to, essentially, print money in the trillions of yen, perhaps even an unlimited amount of yen. The one really predictable outcome of this policy, should the really commit to it, is to decrease the value of the yen against other world currencies and make Japan's exports more affordable. That should bring more money into the country and boost economic activity. So the theory goes, anyway.
But who's going to benefit? You can, if you play your investments right. A truly committed move by the Japanese Central Bank to boost imports means you should think about getting some of those firms as soon as you can. Even if the boost is a short-term one, you should still be able to see some profit from it.
Toyota (NYSE: TM)
Toyota, despite some troubles with recalls lately, is still trading at the top of its range. At the end of last year the company announced that it expected to finish 2012 selling 9.7 million vehicles – an increase of 22% over the year before. On top of that Citigroup upgraded the firm to a BUY based on a weaker Yen before the Central Bank got involved. Toyota's is a good spot to see the price of its vehicles suddenly get better against the competition. The company's stock is trading at $94.83 at the close of Jan. 22, 2013 and has climbed to that level from $71.15 a year ago. Toss in a dividend of 73 cents per share and I'd like it even if the Central Bank wasn't going to try to pump it up.
Sony (NYSE: SNE)
Sony's an interesting case. The stock has been weak this year, but there are signs that good things are on the horizon for the electronics giant. The company didn't exactly come out of the Consumer Electronics Showcase with good press, but it still committed to its core business of cameras, televisions and such. It plans to make efforts to widen its customer base in a sector where a lot of buyers are becoming more feature- and less brand-oriented. Waiting in the wings, of course, is the long rumored console game system, the PlayStation 4. Sony recently shut down production of the PS2 and that's spurred the rumor-mill about the PS4. When that comes out that should provide a big shot in the arm for Sony (and various other game designers). The firm's stock is, frankly, worrisome. It's trading at $13.35 while in the last year it's been as high as $22.35. A 15 cent per share dividend does yield 2.31%, though. I think Sony will do well if the Central Bank follows through. Riskier than Toyota, but not a bad risk.
Panasonic (NASDAQOTH: PCRFY)
This is another firm that could really benefit from a weakening of the Yen. Panasonic is sort of Sony's stodgy older brother. They make good electronics, but not truly flashy ones that command a lot of brand-awareness. Still, they work and that means a lot in a world where having the right brand on your shelves is fading in importance. The company is very challenged by Korean titan Samsung is all aspects of its business, but I think it'll pull through. Still, the challenges are there. Fitch recently downgraded its debt to junk status and that will raise the cost for Panasonic to borrow. Still, the firm did just bring out the ToughPad tablet running Windows 8. There are things to like, here, and the Central Bank's attempt to weaken the Yen could suddenly find the firm as lot more cost-competitive out in the electronics marketplace. The firm's stock has been drifting lower this year, dropping from a high of $9.46 to a low towards the end of the year of $4.61. It's rebounded since, closing yesterday at $6.62. This is a riskier play with a higher potential return. I think it's worth putting some money into, based on what the Central Bank says it's going to do.
Look, a switch in economic policy by a major player is always disruptive to a certain extent. And there's no doubt that's what the Japanese Central Bank is trying to do: be disruptive. The bank's governors have seen what their current policy has led to and they want no more of it. So with the switch, they hope to stimulate things in the Japanese export sector. It'll be interesting to see how things go, as I said. I'll be watching, and I think you should be, too.
Follow Nate on Twitter: @natewooley
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