Wednesday December 26, 2012
by Tom Essaye, contributing editor Money and MarketsShinzo Abe, the new prime minister of Japan, had openly lobbied for the Bank of Japan to increase its inflation target to 2% or 3% from its current 1%. That would be a shift from deflationary central bank policies to inflationary central bank policies.
This has some wide-reaching implications for the global economy. But one of the assets that will be hurt most by this new inflationary monetary policy is the Japanese yen.
For the first time in a generation the Japanese will have more incentives to invest their capital rather than just plow it into Japanese government bonds.
An old saying on Wall Street is "Don't fight the Fed." A corollary to that is "Don't fight the Bank of Japan." And if Japan's new government and its central bank are determined to spur inflation to stimulate economic growth — they will most likely succeed, at the expense of the yen and holders of Japanese bonds.
There is an easy way for you to potentially profit from the trend. The
ProShares Ultra Short Yen (
YCS) is an ETF designed to rise 2 percent for every 1 percent drop in the yen versus the dollar. If these inflationary policies are enacted in Japan, and every sign is they will be, the yen should decline and the YCS should rise.
In an investment landscape as uncertain as the one in which we live, it seems the only constant in the market is central banks trying to spur growth by printing money. In the case of Japan, that strategy is about to go into overdrive.
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