The G7 Strikes Back Against the Yen


It's been a wild ride across the Pacific this week. From a tense standoff of words at the G7 meeting, to surprising comments from Japan's economy minister, the land of the rising sun keeps pushing forward in its goals of economic progress. Investors didn't get much of a break this week -- the Nikkei lost 0.6% this week, including a troubling 1.2% drop on Friday alone. But, based on what's coming out of Japan, it seems like they might not have much longer to wait.

Japan vs. the world
Japanese economy minister Akira Amari first stirred things up on Saturday. Amari noted that, while promoting monetary easing and private sector investment remained core tenants of the new Japanese government, helping stock prices climb in the near future is also a goal. He particularly singled out promoting the Nikkei to the 13,000 mark -- around 2,000 points higher than it is now -- by the end of the fiscal year on March 31.

That's a good deal for investors alright, but other advanced economies are starting to grow worried with Japan's aggressive economic steps. At a meeting of the G7 this week -- a group of the leading developed economies in the world -- leaders moved to clamp down on suspicions of a rising "currency war" over growing inflation. However, one official claimed statements had been intended as a warning to Japan's bold moves with the yen, sending the currency roaring higher against the dollar and the euro on Tuesday.

That certainly wasn't what Japanese economic leaders wanted.

A strong yen hurts Japanese automakers like Toyota and Honda particularly hard, because of their heavy focus on exports. Both stocks plunged lower on Tuesday, and each ended the week in the red. Shares of Toyota fell an ugly 2.7%, while Honda lost a more modest 1.9%. Both Honda and Toyota are betting on a weaker yen to stimulate sales, although the former didn't raise its outlook for the year like the latter did in the most recent round of earnings releases.

If Japan's serious about pulling up stocks, however, it should be a boost to major financials in the third-largest economy -- something shareholders of Nomura Holdings and Mizuho Financial Group can appreciate. It's been a tale of two stocks to start the year for these companies -- Nomura has lost 6.4% so far in 2013, while Mizuho has skyrocketed to gains of 16.6% to kick off the year. If the Nikkei can keep up its gains, however, and Japan makes good on its promise to spur private investment, both should continue soaring higher. Over the past three months, each of these stocks has posted strong double-digit gains.

The Nikkei's been on a tear to start the year, outperforming many other world indices. Japan's not the only overseas locale you can win in, however; profiting from our increasingly global economy can be as easy as investing in your own backyard. The Motley Fool's free report, "3 American Companies Set to Dominate the World," shows you how. Click here to get your free copy before it's gone.

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