U.S. stocks were insulated from the third sharp drop for Japanese stocks over the past week.
Today I am revisiting Japanese stocks but this time in a more optimistic mood.
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The performance of Japanese stocks over the last twenty years is a case in point.
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The move lifted Japanese stocks to their highest level in more than five years.
Japanese stocks surged, pushing the Nikkei above 14, 000 for the first time in nearly five years.
That would send capital flooding back into Japan--making Japanese stocks strong relative to all else.
The softer yen supported Japanese stocks, with the Nikkei Stock Average up 1.2% to 13, 382.89.
The EWJ has failed to capture the full measure of the move higher in Japanese stocks.
Japanese stocks were helped by the weaker yen, with the Nikkei Stock Average up 1.8%.
Foreign investors already account for over 60 percent of trading volume in Japanese stocks.
Despite the downgrade, Japanese stocks in the iShares Japan (EWJ) were moving higher on Tuesday.
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Given the recent market rise, is it still a good time to be in Japanese stocks?
So back to the question: How much value is left in Japanese stocks?
The most important factor influencing the movement of the Japanese stocks lately has been the yen devaluation.
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It is noteworthy that, in two corrections this year (starting in February and July), Japanese stocks outperformed.
The dramatic rally in Japanese stocks, which started in the middle of November, has maintained strong momentum.
The big buyers in past few weeks have been foreigners who were way underweight in Japanese stocks.
Global investors stampeded into Japanese stocks, suggesting that financial markets were sensing that Japan might finally be changing.
It seems foreigners are optimistic about Japanese stocks, and about Japanese companies reaping profits from Asian region growth.
To hedge against the possibility that yen carry trades reverse, you should also have money in Japanese stocks.
The second would involve providing American ships and aircraft with supplies, including fuel and oil from Japanese stocks.
Japanese stocks ended lower, ending an eight day winning streak, and unaffected by further declines in the yen.
The iShares MSCI Japan (EWJ) ETF is a reliable tracker of Japanese stocks, but it comes with currency risk.
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More important to us, will Japanese stocks continue to rise after December 16, when this scenario becomes a reality?
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"Foreign investors now have no choice but to buy Japanese stocks, " said Kenichi Hirano, market analyst at Tachibana Securities.
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Japanese stocks dropped 2.1% on disappointing news about business confidence on the first day of the nation's fiscal year.
The Nikkei 225 index, a collection of Japanese stocks, retreated 0.8% to 9, 458.74.
The softer yen supported Japanese stocks, with the Nikkei Stock Average up 0.9%.
Japanese stocks started the day with a boost, with the Nikkei touching a fresh 2013 high in early trading.
For investors in Japanese stocks and bonds, whether the deadline will be met could mean big profits or losses.
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