Is the Yen Falling Too Fast?

04/09/2013 10:45 am EST

Focus: GLOBAL

Jim Jubak

Founder and Editor, JubakPicks.com

It's a good time to consider your Japan strategy, now that the currency looks ready to smash the 100 barrier, writes MoneyShow's Jim Jubak, also of Jubak's Picks.

The yen fell another 1.7% against the US dollar yesterday, to reach 99.23 to the dollar. The currency has now tumbled 6.2% since Thursday’s more aggressive than expected move by the Bank of Japan, and is down 21.4% in six months.

Support for the yen is just ahead, though, at 99.75 to the dollar. I think the Japanese currency may need to make a couple of runs at 100 before it breaks below that level.

Some backing and filling would be only normal after this big a move, and I’d expect to see some profit taking over the next few days, especially among stocks of exporters and big banks that have moved up so strongly in the last week.

For example, shares of auto exporter Mazda Motor (7261.JP in Tokyo) are up 17% from April 2 through the Tokyo close on April 8. With the intervening weekend, that’s a huge move in just four trading sessions.

The Bank of Japan meets again on April 26. Given the fireworks at the April 3 meeting, I’d expect lots of volatility in the run up to that session.

I don't think you need to sell existing positions in Japanese stocks, such as my Jubak's Picks recommendations of Toyota Motor (TM) or Mitsubishi UFJ Financial Group (MTU) during this pause. But if you've been looking for an opportunity to increase your holdings in Japanese stocks—for the short-term currency move—you might get an opportunity during this period.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund may or may not now own positions in any stock mentioned in this post. For a full list of the stocks in the fund as of the end of December, see the fund’s portfolio here.

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