Short Japanese Yen!

Japanese yen started to lose ground back in Dec last year when Abe won the election. I talked about it back then and suggested to pay attention to the Japanese stocks because they should benefited from the weakening yen. Here is what I said: If indeed the Japanese stocks are immediately going up with the prospect, EZJ should break upwards through $56. If that happens, there is much better chance that it will go up further with more momentum. Well, this is exactly what has happened. EZJ jumped to $75 now, around 40% increase in just 3 months (see below).

But I don't think it will stop here. If you've not yet noticed, Japanese yen lost 3% against US$ yesterday and this trend will likely continue, which is very bullish for the Japanese stocks. What happened? Well, Japan has just got a new chief for their central bank, BOJ. At his first chairing meeting, he announced that BOJ will massively print money by buying Y7.5 Trillion ($77B) worth government bonds every month in order to increase their inflation rate. This is virtually the exact copy of QE in the US. This kind of money printing will inevitably create a huge assets bubble while significantly debasing their currency. See what happened between J-stocks (EZJ/blue) and yen (FXY/green) in the past few months. It is a perfect mirror image, isn't?!

I think it will be very profitable in the next year or two to short Yen, as long as they keep printing money. You may do so by buying the ETF, ProShares UltraShort Yen (YCS). This is a leveraged inverse ETF that will go up while Yen depreciates. Of course, if you want to double the dose, you may buy both EZJ and YCS, but please keep in mind this is not a short-term trade as Yen may likely fluctuate in the near term. However, 6 months to one year from now, I'm quite confident that this trade will be quite profitable.