Japan is the subject of this week’s ETF screener. If you think we have it bad here, be happy you are not looking for a job in the land of the rising sun. This morning Japan revised its 4th quarter numbers, while it’s “not as bad as first estimated,” it’s still ugly.
Here are some of the money paragraphs from AP.
Export demand has collapsed, corporate profits are swerving into losses, and job losses are accelerating nationwide amid Japan’s steepest slump since the end of World War II.
“The Japanese economy was simply collapsing and nose-diving toward the end of last year,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo.
Gross domestic product, or the total value of the nation’s goods and services, fell at a 12.1 percent annual rate in the October-December quarter, slightly better than the Cabinet Office’s preliminary reading of a 12.7 percent contraction.
The contraction is the severest for Japan since the oil shock of 1974 and is double the pace of the decline in the U.S.
Japan’s economy has shrunk for three straight quarters and is almost certainly headed for a fourth quarter of contraction. Like its Asian neighbors, the export-reliant country has been pummeled by the U.S. financial crisis, which morphed into plunging global demand for its cars and gadgets.
The country’s exports plummeted a record 13.8 percent in the fourth quarter from the third quarter, the government said. Capital expenditure — business investment in factories and equipment — fell 5.4 percent from the previous quarter, while government investment grew 0.1 percent.
Many forecasters also expect another year of contraction in 2009. Estimates of the severity of the slump this year range widely with the International Monetary Fund forecasting a 2.6 percent contraction and JPMorgan tipping GDP to shrink 7.7 percent.
But Masamichi Adachi, senior economist at JP Morgan Securities in Tokyo, predicts this quarter will be even worse. He forecasts GDP to plunge an annualized 15 percent in the January-March period, though he expects Japan’s economy to begin climbing again by the end of the year.
Investors can possibly profit by shorting or buying put options on Japanese ETFs like WisdomTree Japan Equity Income (DNL), WisdomTree International Industrial (DDI), iShares MSCI Japan Index (EWJ), SPDR Russell/Nomura PRIME Japan (JPP), PowerShares FTSE RAFI Japan (PJO), iShares MSCI Japan Small Cap Index (SCJ), CurrencyShares Japanese Yen Trust (FXY) and iPath JPY/USD Exchange Rate ETN (JYN).
If shorting or buying put options are not in your comfort zone, profits can also come by investing in UltraShort MSCI Japan ProShares (EWV). EWV’s objective is daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the MSCI Japan Index. So when the MSCI Index falls, your dollars grow.
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