ProShares UltraShort MSCI Japan (ARCA: EWV)

ProShares UltraShort MSCI Japan (ARCA:EWV), Quote.Headers.trade-ideas

The Fund invests in financial instruments that ProShare Advisors believes, in combination, should produce daily returns consistent with the Daily Target. The Index is constructed and maintained by MSCI Inc. The Index is designed to measure the performance of the large and mid cap segments of the Japanese equity market. The Index covers 85% of the market capitalization in Japan. The Index is published under the Bloomberg ticker symbol MXJP.

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Japan Runs Trade Deficit as Exports to China Collapse

Japan&#39;s GDP Shrinks Ahead of Election

Direxion, the Massachusetts-based ETF issuer best known for its suite of leveraged funds, has filed plans with the Securities and Exchange Commission to possibly introduce four pairs of triple-leveraged bullish and bearish ETF tracking international markets.

	The firm has filed plans for the Direxion Daily Chile Bull 3x Shares and the Direxion Daily Chile Bear 3x Shares. Those funds will track the daily performance of the MSCI Chile IMI 25/50 Index, the same index followed by the $589.9 million iShares MSCI Chile Capped Investable Market Index Fund (NYSE: <a class="ticker" href="/stock/ech#NYSE">ECH</a>).

	Direxion, the second-largest issuer of leveraged ETFs, has also filed plans for the Direxion Daily Hong Kong Bull 3x Shares and the Direxion Daily Hong Kong Bear 3x Shares. Those ETFs will follow the MSCI Hong Kong Index, the underlying index for the $3.49 billion iShares MSCI Hong Kong Index Fund (NYSE: <a class="ticker" href="/stock/ewh#NYSE">EWH</a>).

	The Direxion Daily Japan Bull 3x Shares and the Direxion Daily Japan Bear 3x Shares have also been added to Direxion's regulatory pipeline. Those funds will follow the MSCI Japan Index, the same index used by the iShares MSCI Japan Index Fund (NYSE: <a class="ticker" href="/stock/ewj#NYSE">EWJ</a>), the largest Japan ETF.

	Investors could get their first taste of triple-leveraged Mexico exposure if the Direxion Daily Mexico Bull 3x Shares and the Direxion Daily Mexico Bear 3x Shares come to life. Those ETFs will follow the MSCI Mexico IMI 25/50 Index, the underlying index for the $3 billion iShares MSCI Mexico Capped Investable Market Index Fund (NYSE: <a class="ticker" href="/stock/eww#NYSE">EWW</a>).

	Direxion's Chile and Mexico leveraged funds will have expense ratios of 1.1 percent per year, <a href="http://www.sec.gov/Archives/edgar/data/1424958/000119312513146098/d517535d485apos.htm">according to the filing</a>. The Hong Kong and Japan ETFs will have annual fees of 1.08 percent.

	The Chile and Hong Kong offerings, assuming they come to market, would currently face no competition. However, Direxion rival ProShares issues the double-leveraged ProShares UltraShort MSCI Japan (NYSE: <a class="ticker" href="/stock/ewv#NYSE">EWV</a>) and the ProShares Ultra MSCI Japan (NYSE: <a class="ticker" href="/stock/ezj#NYSE">EZJ</a>). ProShares also sponsors two double-leveraged plays on Mexico, the ProShares UltraShort MSCI Mexico Capped IMI (NYSE: <a class="ticker" href="/stock/smk#NYSE">SMK</a>) and the ProShares Ultra MSCI Mexico Capped IMI (NYSE: <a class="ticker" href="/stock/umx#NYSE">UMX</a>).

	Direxion <a href="http://www.benzinga.com/trading-ideas/long-ideas/13/04/3484301/direxion-rolls-out-leveraged-brazil-south-korea-etfs">introduced two new ETFs on Wednesday</a>, the Direxion Daily South Korea 3X Bull Shares (NYSE: KORU) and the Direxion Daily Brazil Bull 3X Shares (NYSE: BRZU).

	Direxion currently has three other leveraged country-specific bullish emerging markets ETFs trading. Those are the Direxion Daily Russia Bull 3X Shares (NYSE: <a class="ticker" href="/stock/rusl#NYSE">RUSL</a>), the Direxion Daily China Bull 3X Shares (NYSE: <a class="ticker" href="/stock/yinn#NYSE">YINN</a>) and the Direxion Daily India Bull 3X Shares (NYSE: <a class="ticker" href="/stock/indz#NYSE">INDZ</a>).

	For more on ETFs, click <a href="http://www.benzinga.com/etfs">here</a>.

Japan's Ministry of Finance reported Wednesday that Japan's trade deficit for October was 549 billion yen ($6.7 billion), the fourth consecutive monthly trade deficit. The October trade deficit was much bigger than the 360 billion yen ($4.4 billion) forecast by economists.

Japan's exports to China were down 11.6 percent year-over-year, paced by an 82 percent decline in automobile exports and a 28.1 percent decline in the export of car parts as Japanese car companies cut back on their operations in China following heightened tensions between the two countries over a territorial dispute.

The dispute over the Senkaku/Diayou Islands has resulted in an informal boycott of Japanese goods following sometimes violent demonstrations in which Chinese drivers of Japanese cars were threatened and some Japanese property in China was destroyed. Anti-Japanese activity peaked in September and some Japanese car companies have reported that sales in China are beginning to recover but not quickly enough to salvage the October trade figures.

“The figures are the clearest indication yet that the spat over a chain of islands in the East China Sea is deepening Japan's export-led downturn, potentially dragging the world's third-largest economy into a technical recession,” <a href="http://www.moneycontrol.com/news/world-news/japan-posts-biggest-china-trade-deficit_785673.html">CNBC</a> reported. “Third-quarter economic data, reported last week, showed that a slump in net exports led by China and the EU was the main contributor to an overall 0.9 percent contraction in gross domestic product between July and September.”

Over the past ten years, China has displaced the U.S. as Japan's most important trading partner. However, the territorial dispute with China has resulted in increased exports from Japan to the United States, indicating that this trend might be reversing, according to some analysts. 

The Japanese numbers were echoed in statistics released Tuesday by China's Ministry of Commerce. According to the Chinese figures, imports from Japan fell by 32 percent in October to $460 million. Asahi Shinbun, a major daily newspaper, quoted a Japanese government source saying, “We can't decide based on a single month's data. But there are an increasing number of companies that are taking their time [about investing in China] due to heightened political risk as the result of worsening relations between Japan and China.”

Still, direct investment from Japan to China in October was just about unchanged at $8,310 million, according to China's Ministry of Commerce.

It should be noted that Japan's participation in the Trans-Pacific Partnership (TPP) being promoted by President Obama during his trip to Southeast Asia is entirely dependent upon the outcome of Japan's Lower House election on December 16. Prime minister Yoshihiko Noda has made the election a referendum on TPP while the opposition is running against participating in TPP.

In the meantime, Japan, China and South Korea have been discussing a trilateral free trade agreement this week.

With the yen trading against the U.S. dollar at an 82 handle for the first time since April, chances are good that more competitively priced Japanese goods and an easing of tensions between Japan and Chinawill lead to improved Japanese trade figures in November and December.

Japan's July-September quarter GDP turned in its worst performance since the period immediately following last year's devastating earthquake. Real GDP fell at an annual rate of 3.5 percent during the quarter, according to figures released by the Cabinet Office today. “Shipments to Asia, Europe and the U.S. all slid, as did capital spending,” <a href="http://www.bloomberg.com/news/2012-11-11/japan-s-economy-shrinks-at-fastest-pace-since-earthquake.html">Bloomberg</a> reported.

The sharp decline of exports to China as a territorial dispute resulted in calls for a boycott of Japanese products by Chinese consumers was reflected in the final month of the quarter. 

In Japan itself, consumption fell for the second straight quarter—the first time that has happened since 2009—as the government ended its program of subsidies for the purchase of fuel-efficient cars. Capital spending also fell as corporations became more pessimistic about the future.

Today's GDP data was bad news for Prime Minister Yoshihiko Noda, who is under pressure to call a Lower House election before year-end. “'The GDP figures were grim,' Noda said in parliament after the data release, as he pledged to instill a ‘sense of urgency' in his government's economic policy,” Bloomberg said. 

Economic prospects during the July-September quarter were complicated by Japan's own “fiscal cliff.” Japanese law requires that the Diet specifically ratify deficit spending before any deficit funding can take place. Normally, this is like raising the debt ceiling in the U.S.—a routine, non-controversial vote in Congress to approve the increase. 

But, this year, the major opposition parties in Japan have refused to go along with the deficit spending authorization until Prime Minister Noda sets the date for a Lower House election. If the government cannot issue new deficit bonds, then it will run out of money. About 40 percent of Japan's annual budget is funded through deficit spending. The government has just about reached the limit of what it can spend without issuing new deficit bonds.

The opposition parties want the prime minister to dissolve the Diet and hold elections before the end of this year. The opposition wants the next election to be a referendum on some of Noda's more controversial policies.

These include plans to raise Japan's consumption tax (a value-added or sales tax) from 5 to 10 percent in stages over the next several years. Noda has also taken a stand in favor of joining the U.S.-sponsored Trans-Pacific Partnership (TPP), which would establish a free trade zone between the United States and a number of Pacific Rim countries, including Japan, South Korea, Singapore and Chile. 

The TPP is very controversial in Japan, partly because it would require the complete liberalization of Japan's agricultural markets. But TPP would also require equal access to all markets in each participating country, including financial services and other areas where the U.S. might be dominant. The advantage in joining TPP for Japan is that it would offset the bilateral free trade agreement between South Korea and the U.S., signed in 2011, giving Japan the same access to U.S. markets already enjoyed by South Korea.

“Major newspapers said on Saturday that support was building in the Noda administration to announce Japan's entry into the proposed American-led regional agreement sometime in the next two months,” <a href="http://www.nytimes.com/2012/11/11/world/asia/japans-premier-may-announce-plan-to-join-free-trade-pact.html">The New York Times </a> reported. “The reports said that move would be immediately followed by a decision to dissolve Parliament for national elections that would take place a month later. “

All of this is coming at a time of heightened political turmoil in Japan. Noda's party, the Democratic Party of Japan (DPJ), is falling apart as members fearful of losing their seats in the next election flee to several opposition parties, including a new, conservative-nationalist party that is being put together by former Tokyo governor, Shintaro Ishihara.

While Noda's DPJ retains a slim majority in the Lower House, it is already in the minority in the Upper House. This makes it more difficult to pass controversial legislation, including this year's deficit spending authorization.

Earlier today, the DPJ and the two major opposition parties, the Liberal Democratic Party (LDP) and the Komeito, agreed with Prime Minister Noda to combine the deficit authorization bill with the budget to avoid this kind of harmful political haggling in the future. It is expected that a bill authorizing deficit spending through the year ending March 31, 2016 will be passed over the next week or so, putting an end to Japan's fiscal cliff for the time being. 

Noda has not yet indicated when he will call an election but the fact that the opposition parties ended their blockade of the deficit authorization bill would seem to indicate that some deal has been struck.

In the meantime, several voter polls conducted by Japan's major news organizations show support for the Noda government is at new lows, making the decision to call an election even more difficult.

Japan's GDP Shrinks Ahead of Election

Shares of the following exchange traded funds are more than 15% higher than 90 days ago and trading within 10% of their 52-week highs.

PowerShares Deutsche Bank Agriculture Double Short ETN (NYSE: <a class="ticker" href="/stock/aga#NYSE">AGA</a>) is trading near the 52-week high and is about 23% higher than at the beginning of the year. The investment seeks to replicate the price and yield performance of the Deutsche Bank Liquid Commodity index -- Optimum Yield Agriculture, which is composed of roughly equal percentages of corn, wheat, soybean and sugar futures contracts. The fund is a senior unsecured obligation.

PowerShares Deutsche Bank Commodity Double Short ETN (NYSE: <a class="ticker" href="/stock/dee#NYSE">DEE</a>) is almost 30% higher year to date, as well as up about 18% in the past month. The investment seeks to replicate twice the inverse of the Deutsche Bank Liquid Commodity Total Return index, which is intended to reflect changes in the market value of certain commodity futures contracts based on crude oil, heating oil, corn, wheat, gold and aluminum.

PowerShares Deutsche Bank Commodity Short ETN (NYSE: <a class="ticker" href="/stock/ddp#NYSE">DDP</a>) is trading more than 16% higher than three months ago, despite pulling back about 3% in the past week. The investment seeks to replicate the inverse of the Deutsche Bank Liquid Commodity Total Return index, which is intended to reflect changes in the market value of certain commodity futures contracts based on crude oil, heating oil, corn, wheat, gold and aluminum.

See also: <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/06/2659009/top-10-european-regional-etfs">Top 10 European Regional ETFs</a>

ProShares UltraShort Dow Jones-UBS Commodity (NYSE: <a class="ticker" href="/stock/cmd#NYSE">CMD</a>) is up more than 17% since the beginning of the year, including more than 11% in the past month. The investment seeks to provide daily investment results that correspond to twice the inverse of the daily performance of the Dow Jones-UBS Commodity Index. The fund invests in any one of or combinations of financial instruments such as swap agreements, futures contracts, forward contracts and option contracts. 

ProShares UltraShort MSCI Japan (NYSE: <a class="ticker" href="/stock/ewv#NYSE">EWV</a>) is up almost 26% in the past quarter, including more than 11% higher in the past month. The share price is more than 9% below the 52-week high. The nondiversified fund invests in derivatives that should have similar daily return characteristics as twice the inverse of the daily return of the underlying index. Assets of the fund not invested in derivatives typically are held in money market instruments.

ProShares Ultra 20+ Year Treasury (NYSE: <a class="ticker" href="/stock/ubt#NYSE">UBT</a>) has pulled back about 9% from a recent 52-week high. The share price is more than 70% higher than a year ago, including up more than 12% in the past month. The investment seeks daily investment results that correspond to twice the daily performance of the underlying index. Assets of this nondiversified fund not invested in U.S. government securities or derivatives typically are held in money market instruments.

See also: <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/06/2659773/exchange-traded-concepts-to-launch-oil-sands-etf">Exchange Traded Concepts to Launch Oil Sands ETF</a>

UBS E-TRACS Fisher-Gartman Risk Off ETN (NYSE: <a class="ticker" href="/stock/off#NYSE">OFF</a>) has pulled back about 7% from a recent high but is still more than 21% higher than 90 days ago. The investment seeks to replicate the inverse of the Fisher-Gartman Risk Index, which consists of a mix of long and short positions in various asset classes whose overall value is expected to rise when the outlook on markets and the broader economy is positive and to decrease when such outlook is negative.

VelocityShares 3x Inverse Crude ETN (NYSE: <a class="ticker" href="/stock/dwti#NYSE">DWTI</a>) is more than 67% higher than when it began trading in February, but also down more than 6% from a recent high. The investment seeks to replicate three times the inverse of the S&amp;P GSCI Crude Oil Index ER, which comprises futures contracts on a single commodity and is calculated according to the methodology of the S&amp;P GSCI Index. It was one of four bull-and-bear pairs of leveraged ETNs launched by VelocityShares in February.

VelocityShares 3x Inverse Brent Crude ETN (NYSE: <a class="ticker" href="/stock/doil#NYSE">DOIL</a>) is more than 54% higher than when it began trading in February, as well as trading near its high. The investment seeks to replicate three times the inverse of the S&amp;P GSCI Brent Crude Index ER, which comprises futures contracts on a single commodity and is calculated according to the methodology of the S&amp;P GSCI Index. It was one of four bull-and-bear pairs of leveraged ETNs launched by VelocityShares in February.

See also: <a href="http://www.benzinga.com/analyst-ratings/analyst-color/12/06/2658878/india-one-foot-out-the-door-of-the-brics-house-epi-pin-s">India: One Foot out the Door of the BRICS House?</a>

<div id="action-items">ACTION ITEMS:

Bullish: Investors may also want to consider the following trades: 

<ul><li>Direxion Daily Russia Bear 3X Shares (NYSE: <a class="ticker" href="/stock/russ#NYSE">RUSS</a>) is more than 95% higher than 90 days ago.</li>
<li>Direxion Daily BRIC Bear 3X Shares (NYSE: <a class="ticker" href="/stock/bris#NYSE">BRIS</a>) is more than 73% higher than 90 days ago.</li>
<li>Direxion Daily Natural Gas Related Bear 3X Shares (NYSE: <a class="ticker" href="/stock/gasx#NYSE">GASX</a>) is more than 70% higher than 90 days ago.</li>
</ul>Bearish: Traders may prefer to consider these alternative positions in dividend-paying stocks:

<ul><li>Expedia (NASDAQ: <a class="ticker" href="/stock/expe#NASDAQ">EXPE</a>) is up about 50% in the past 90 days.</li>
<li>Intercontinental Hotels (NYSE: <a class="ticker" href="/stock/ihg#NYSE">IHG</a>) is up about 35% in the past 90 days.</li>
<li>Spreadtrum Communications (NASDAQ: <a class="ticker" href="/stock/sprd#NASDAQ">SPRD</a>) is up more than 29% in the past 90 days.</li>
</ul>Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.</div>

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Nine ETFs on a Roll (DOIL, DEE, EWV, AGA)

The Japanese economy, the world's third-largest behind the U.S. and China, showed a smaller-than-expected fourth-quarter GDP contraction. Capital spending actually rose 4.9% and Japan's economy looks to be getting a lift from a weaker yen and reconstruction efforts following last year's tragic natural disasters.

That's the good news, but those highlights do little to change the fact that reconstruction efforts are temporary, Japan faces major demographic issues with one of the world's oldest populations and the country has to deal with $3 trillion in debt.

We're not going to gloss over the fact that the iShares MSCI Japan Index Fund (NYSE: <a class="ticker" href="/stock/ewj#NYSE">EWJ</a>) is up almost 10% year-to-date, but that's barely more than what the S&amp;P 500 has offered, indicating investors really aren't being compensated for rolling the dice on Japan over the U.S.

Maybe now is a good time to consider hedging Japan-related positions or shorting the land of the rising sun with these ETFs.

ProShares UltraShort MSCI Japan (NYSE: <a class="ticker" href="/stock/ewv#NYSE">EWV</a>)
There are plenty of country-specific inverse ETFs out there, but the ProShares UltraShort MSCI Japan definitely isn't one that gets a lot of attention. EWV's average daily volume of less than 9,000 shares highlights the ETF's under the radar status. One day does not change a trend, but oddly enough, EWV traded over five times its average daily turnover today. For those that plan to hold EWJ for extend time frames, EWV is worth looking into as an occasional hedge.

CurrencyShares Japanese Yen Trust (NYSE: <a class="ticker" href="/stock/fxy#NYSE">FXY</a>)
As we just mentioned, part of Japan's good vibrations this year can be attributed to the finally falling yen. To that end, the search for ETFs with ugly charts should included the CurrencyShares Japanese Yen Trust. FXY's inverse counterpart, the ProShares UltraShort Yen (NYSE: <a class="ticker" href="/stock/ycs#NYSE">YCS</a>), has added over 13% in the past month alone. 

Being long the yen isn't just a bearish bet on Japanese exporters, it's also an effective way of betting against the euro. Despite all of Japan's obvious economic woes, the yen still has a safe haven feel in some circles.

PowerShares DB 3x Inverse Japanese Government Bond Futures ETN (NYSE: <a class="ticker" href="/stock/jgbd#NYSE">JGBD</a>)
JGBD is only a few months old, trades barely more shares per day than EWV does and has an expense ratio of 0.95%. However, Japan long ago lost its AAA credit rating and with the largest debt-to-GDP ratio in the developed world, further downgrades are a real possibility meaning you don't want to be long Japanese bonds.

Remember what Kyle Bass had to say about Japan: "We believe the debts of the following nations, among others, are not sustainable in the current economic environment: Greece, Italy, Japan, Ireland, Iceland, Japan, Spain, Belgium, Japan, Portugal, France, and, have we mentioned Japan?"

iShares MSCI All Country Asia ex-Japan Index Fund (Nasdaq: <a class="ticker" href="/stock/aaxj#Nasdaq">AAXJ</a>)
For those that don't want to short EWJ or being long an inverse ETF, AAXJ is a great way of skirting Japan. Not to be trite, but in making a list of Asian countries that have corresponding U.S.-listed ETFs, the long Japan funds might be at the bottom of many traders' lists.

Said differently, Asia is worth trading, especially when one avoids Japan. AAXJ does that. China, South Korea, Taiwan and Hong Kong account for over 71% of the ETF's weight. Other countries in the ETF include India, Singapore, Indonesia and Thailand. All have far rosier prospects than Japan.

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Not Rising: Short Japan With These ETFs (EWJ, AAXJ, FXY)

The Japanese yen reversed course and strengthened against the American dollar, the euro and other major currencies during trading on Monday.

One of the reasons for the strengthening yen was that the Group of 20 nations resisted the requests from European Union leaders to increase the contribution from the International Monetary Fund (<a class="ticker" href="/stock/imf#">IMF</a>) being used to help bolster the defense against a possible euro zone financial meltdown. With the future of the euro looking a bit bleaker, traders began moving funds back into the yen, which along with the Swiss franc is considered a safe haven currency.

Although most analysts believe that the yen will weaken further against the dollar over the next year, the yen has fallen so quickly against the dollar over the past two weeks that some traders may have been engaged in profit taking today.

Before today's trading session, the yen had weakened over the past two weeks since the Bank of Japan announced that it was stepping up its efforts to cool the rising yen.

Two weeks ago the Bank of Japan said that it was setting an official inflation goal of 1 percent in order to fight the deflation that has plagued the Japanese economy for most of the last two decades. The Bank of Japan also announced that it was pumping 10 trillion yen ($124 billion) into the Japanese economy.

Those moves followed an earlier confirmation by officials at Japan's Finance Ministry that they had conducted stealth currency interventions last year in order to weaken the yen and that might do so again in the future if speculators continued to push the yen higher.

The efforts of the Bank of Japan and the Finance Ministry finally halted the yen from moving higher against other major currencies and began to ease the pressure that Japanese exporters were feeling.

Japanese companies like Sony (NYSE: <a class="ticker" href="/stock/sne#NYSE">SNE</a>) and Toyota Motor Corporation (NYSE: <a class="ticker" href="/stock/tm#NYSE">TM</a>) had long complained that the yen was overvalued and was making it difficult for them to earn a profit on their exported goods.

News that the Japanese economy shrank a worse than expected annualized 2.3% during the fourth quarter of 2011 may have also played a part in the Bank of Japan's decision to take decisive action to halt the rising yen and make Japan's export driven economy more competitive.

Although many Japanese might be worrying today about where the yen will go from here, it seems more than likely that Japanese officials will stick to their plan to weaken the yen in order to give the Japanese economy a much needed economic boost by making Japanese exporters more price competitive.

 

<div id="action-items">ACTION ITEMS: Bullish: Traders who believe that the yen will soon reverse course and begin to weaken again might want to consider the following trades: <ul><li>Buy individual Japanese stocks like Sony (<a class="ticker" href="/stock/sne#">SNE</a>), Toyota Motor Corporation (TM) and Panasonic (NYSE: <a class="ticker" href="/stock/pc#NYSE">PC</a>) or the iShares MSCI Japan Index Fund (NYSE: <a class="ticker" href="/stock/ewj#NYSE">EWJ</a>). If the yen weakens further against the dollar and the euro, Japanese stocks could climb higher.</li></ul>Bearish: Traders who believe that the side effects of the euro zone's sovereign debt crisis will be too strong for Japanese officials to counter may consider alternative positions: <ul><li>The CurrencyShares Japanese Yen (NYSE: <a class="ticker" href="/stock/fxy#NYSE">FXY</a>), the ProShares UltraShort MSCI Japan (NYSE: <a class="ticker" href="/stock/ewv#NYSE">EWV</a>) and the ProShares UltraShort Euro (NYSE: <a class="ticker" href="/stock/euo#NYSE">EUO</a>) could all move higher if the yen begins to strengthen again because of an escalation of the euro zone's financial crisis.</li></ul>Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.</div>

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Japanese Yen Falls Against US Dollar & Euro

Standard and Poor's affirmed its AA- rating for Japan, while maintaining a negative outlook for the country. The credit rating agency also warned that Japan could be downgraded if its public debt continued climbing higher or if the Japanese economy grows more slowly than expected.

One of the reasons that Standard and Poor's is concerned is that Japan has the highest public debt to gross domestic product ratio of any industrialized economy. Although Prime Minister Yoshihiko Noda has proposed raising the sales tax from its current level of 5 percent up to 8 percent in 2014 and then to 10 percent in 2015 in order to improve the Japanese government's financial health, it could be difficult for him to do so because his popularity is falling and his Democratic Party lacks the votes needed to push the tax increase through Japan's parliament.

The Japanese opposition says that it is concerned that raising taxes could undercut Japan's efforts to boost economic growth. Resistance to the tax increase could grow even stronger because it was reported just last week that Japan's economy shrank during the last quarter of 2011 and the country announced today that its January trade deficit surged to a record high of 1.48 trillion yen ($19 billion). If Japan's economy doesn't show signs of strength soon, the chances of implementing the tax increases could drop significantly. Even if the tax increase makes it through parliament, it could have the unwanted side effect of undermining economic growth.

A downgrade by Standard and Poor's is made more likely because focusing efforts on Japan's high public debt could undermine the country's economic recovery and focusing on boosting economic activity could push the deficit to even higher levels.

Standard and Poor's also noted that reducing the public debt and improving economic performance would have no affect on Japan's aging population. As Japan's population ages and families have less children, Japan's tax base will become smaller while welfare spending on the elderly increases. So even if Japan is able to avoid a downgrade in the short term, the country has yet to deal with its much more serious long term demographic issues.

 

<div id="action-items">ACTION ITEMS: Bullish: Traders who believe that Japan will be able to successfully perform the balancing act of reducing its deficit while supporting economic growth might want to consider the following trades: <ul><li>Buying Japanese stocks like Mitsubishi UFJ Financial Group (NYSE: <a class="ticker" href="/stock/mtu#NYSE">MTU</a>), Sony (NYSE: <a class="ticker" href="/stock/sne#NYSE">SNE</a>) and Hitachi (NYSE: <a class="ticker" href="/stock/hit#NYSE">HIT</a>) could prove profitable if Japan's economy improves and steps are taken to reduce its debt burden.</li></ul>Bearish: Traders who believe that Japan will not be able to make its economy grow stronger while raising taxes during a time of falling exports may consider alternative positions: <ul><li>The ProShares UltraShort MSCI Japan (NYSE: <a class="ticker" href="/stock/ewv#NYSE">EWV</a>) ETF should see its share price move higher if the Japanese economy continues to disappoint and Japanese politicians are unable to cooperate.</li></ul>Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.</div>

Japan Warned of Possible Downgrade

Japanese authorities reported a trade deficit for last month that was the biggest January trade deficit on record. A strong yen, after effects from last year's natural disasters and weakening demand in China and Europe were the major contributing factors to Japan's growing trade deficit.

The Japanese Ministry of Finance reported a January trade deficit of 1.48 trillion yen ($19 billion), which was caused by a 9.3 percent fall in exports and a 9.8 percent increase in imports.

Although some Japanese officials have claimed that the country's trade deficits will be temporary, that might not be true if Japan does not get more of its nuclear power plants back online soon. Much of the Japanese trade deficit is being driven by a surge in energy imports that occurred after last year's earthquake and tsunami led to many of Japan's nuclear power plants being taken offline due to accidents and safety concerns.

Although Japan is dependent on nuclear power for much of its energy production, public wariness over nuclear power has increased since last year when the country experienced the worst nuclear disaster since Chernobyl along with a number of nuclear radiation scares. If the Japanese public can't be convinced that its in the country's best interest to increase use of nuclear energy, Japan could remain dependent on outside sources of energy, which would make it difficult for the country to eliminate its trade deficit.

Another factor in Japan's trade deficit is weakening demand in important trade partners like Europe and China. It was announced last week that the euro zone countries economies shrank as a group during the last quarter of 2011. Moody's Investors Service also downgraded a several euro zone countries and warned over 100 euro zone banks that they were in danger of being downgraded. With almost nothing but bad news coming out of Europe, Japan shouldn't expect exports to Europe to increase any time soon.

There have also been signs of weakening demand in China. Until the last several months, Chinese authorities concentrated their efforts on fighting inflation. However, recent economic data indicates a cooling Chinese economy and authorities have for the most part reversed course in order to keep the Chinese economy growing at a brisk pace. If the China is unable to prop up up domestic demand, Japan's trade gap with China could widen.
 
The only bright spot among Japan's trade partners has been the positive economic data that has been coming out of the United States. However, a possible financial collapse in Europe is looming, which could undermine recent positive developments in the American economy.

The strong Japanese yen has also had a negative impact on Japanese exports because it makes it more difficult for Japanese manufacturers to make a profit from overseas trade. Japanese manufacturers like Sony (NYSE: <a class="ticker" href="/stock/sne#NYSE">SNE</a>) and Honda (NYSE: <a class="ticker" href="/stock/hmc#NYSE">HMC</a>) have long complained that an overvalued yen was hurting their bottom lines. Japanese authorities finally acted last week when the Bank of Japan announced an economic stimulus package and set a goal of 1 percent inflation in order to eliminate the deflation that has plagued Japan's economy for most of the last two decades. The yen backed off of its near record exchange rates but if the situation in Europe deteriorates, the yen could start overheating again.

While reconstruction work in Japan is expected to help swing the Japanese economy to growth after last quarter's contraction, the surge of energy imports combined with weakening demand in Europe and China could derail Japanese efforts to give the economy a boost. Investors will have to wait and see if the improving economic outlook in the United States and a weakening yen will be enough to eliminate the Japanese trade deficit.

 

<div id="action-items">ACTION ITEMS: Bullish: Traders who believe that the Japanese economy will be able recover and go back to generating trade surpluses might want to consider the following trades: <ul><li>The iShares MSCI Japan Index (NYSE: <a class="ticker" href="/stock/ewj#NYSE">EWJ</a>) ETF and stocks like Sony (<a class="ticker" href="/stock/sne#">SNE</a>), Toyota Motor Corporation (NYSE: <a class="ticker" href="/stock/tm#NYSE">TM</a>) and Panasonic Corporation (NYSE: <a class="ticker" href="/stock/pc#NYSE">PC</a>) could move higher if Japan is able to swing from deficit to surplus. </li></ul>Bearish: Traders who believe that Japan's growing dependence on energy imports will doom the country to a future of deficits may consider alternative positions: <ul><li>Shorting individual Japanese stocks or buying an ETF like the ProShares UltraShort MSCI Japan (NYSE: <a class="ticker" href="/stock/ewv#NYSE">EWV</a>) could both be profitable investments if Japan's economy continues to decline.</li></ul>Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.</div>

Japan's Trade Deficit Surges to Record High

Japan's economy shrank more than expected during the last quarter of 2011, as a strong yen and floods in Thailand hampered Japanese efforts to recover from last year's earthquake and tsunami. The Japanese economy shrank an annualized 2.3% during the 4th quarter, which was a much bigger drop than most economists predicted.

Japan has faced a number of obstacles to economic growth since disaster struck last year in the form of an earthquake that triggered a devastating tsunami. The Japanese economy has grown even more dependent on energy imports because some of the country's nuclear power plants were taken offline over safety concerns raised by the badly damaged Fukushima Daiichi nuclear power plant. Much of the Japan's refining capacity was also disrupted by the disaster, which slowed the efforts of manufacturers like Toyota Motor Corporation (NYSE: <a class="ticker" href="/stock/tm#NYSE">TM</a>), Sony (NYSE: <a class="ticker" href="/stock/sne#NYSE">SNE</a>) and Honda (NYSE: <a class="ticker" href="/stock/hmc#NYSE">HMC</a>) to recover from the disaster.

Japan's export driven economy was also hurt last year by an increasingly strong yen, as traders wary of the Eurozone financial crisis moved money into safe haven currencies like the Japanese yen and the Swiss franc. Despite Japanese efforts to cool the rising yen, Japan's currency remains at levels that make it extremely difficult for Japanese exporters to make a profit.

Unusually severe flooding in Thailand also played a large part in the Japanese economy's dismal 4th quarter performance. Many Japanese exporters have manufacturing facilities in Thailand, which were shut down by flooding that reached the streets of Bangkok.

The financial crisis facing Eurozone economies like Greece, Italy and Spain was another factor in Japan's worse than expected 4th quarter economic contraction. Besides its effect on the Japanese yen, the financial crisis has led to less demand for Japanese products from struggling European economies.

Japanese officials and most economists commenting on the issue say that the worst is over and that Japan will soon return to economic growth. There are a number of factors that support this opinion. Earthquake and tsunami reconstruction projects in Japan and the fading effects of the Thai floods should give the Japanese economy a much needed boost in the 1st quarter of 2012.

If Greece is able to avoid default and the American economy improves, Japanese exporters will see rising demand and the yen could fall back to levels that will make it easier for Japanese exporters to sell their products in international markets for a profit.

The Japanese government has also said that it might intervene in the foreign exchange markets if the Japanese yen doesn't fall. Japan's Finance Ministry confirmed last week that it had conducted stealth interventions last year and that it might do so again if the yen remains at levels that aren't conducive to a growing Japanese economy.

Japan's stock market took today's economic figures in stride. The NIKKEI 225 index of Japanese stocks rose 0.58% to end the Monday trading session at 8,999.18.

While the worse than expected 4th quarter economic performance may be disturbing, Japan's economy should be back on the path to growth in the 4th quarter.

 

<div id="action-items">ACTION ITEMS: Bullish: Traders who believe that Japan's economy will return to growth in the 1st quarter might want to consider the following trades: <ul><li>Stocks like Toyota (TM), Mitsubishi UFJ Financial Group (NYSE: <a class="ticker" href="/stock/mtu#NYSE">MTU</a>) and Sony (<a class="ticker" href="/stock/sne#">SNE</a>) could do well if Japan's economy starts to grow and the yen falls lower.</li></ul><ul><li>Investors looking for a simple way to profit from Japanese economic growth might want to take a look at the iShares MSCI Japan Index Fund (NYSE: <a class="ticker" href="/stock/ewj#NYSE">EWJ</a>). The fund could move higher if Japan's economy quickly returns to growth.</li></ul>Bearish: Traders who believe that the worse than expected economic contraction could be a sign of more trouble ahead for the Japanese economy may consider alternative positions: <ul><li>Traders could short individual Japanese stocks or short a broad range of Japanese stocks through the ProShares UltraShort MSCI Japan (NYSE: <a class="ticker" href="/stock/ewv#NYSE">EWV</a>) ETF. Economists and Japanese officials have tried to explain the reasons why the Japanese economy performed significantly worse than they forecast, so traders might not have much faith in their predictions for the current quarter.</li></ul>Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.</div>

How to Profit From Japan's Shrinking Economy

Japanese companies had a rough 2011, following last spring's earthquake and nuclear crisis. But the stocks listed here have started off the year on a good footing, rising between 10% and 35% year to date. They represent a cross-section of Japan's manufacturing sector, all are traded on U.S. exchanges, and each pays a dividend, too.

Advantest (NYSE: <a class="ticker" href="/stock/ate#NYSE">ATE</a>) rose more than 33% in the past month but is still down about 41% from a year ago. This Tokyo-based maker of semiconductor testing systems announced in January the launch of a diesel emissions analysis service. The company was founded in 1954 and now has a market cap of $2.1 billion. Its dividend yield is 0.9%. However, the stock has underperformed Massachusetts-based competitor Teradyne (NYSE: <a class="ticker" href="/stock/ter#NYSE">TER</a>) over the past six months.

Honda Motor (NYSE: <a class="ticker" href="/stock/hmc#NYSE">HMC</a>) is up about 16% year to date, despite pulling back late last week. Its Super Bowl ads featuring Jerry Seinfeld and Matthew Broderick were highly rated, and part of a plan to increase sales, particularly in the Acura division. Honda's P/E ratio is less than that of larger competitor Toyota, and its operating margin is better than Toyota's too. Over the past six months, the stock's performance has been largely in line with Nissan, Toyota and General Motors (NYSE: <a class="ticker" href="/stock/gm#NYSE">GM</a>).

Kubota (NYSE: <a class="ticker" href="/stock/kub#NYSE">KUB</a>) is trading more than 15% higher year to date, including up about 6% in the past week. This farming machinery and infrastructure producer announced in December that it would acquire Norwegian farming equipment maker Kverneland. Kubota's operating margin is higher than the industry average. The $12.4 billion market cap company has a dividend yield of 1.6%. The stock has underperformed CNH Global (NYSE: <a class="ticker" href="/stock/cnh#NYSE">CNH</a>) and Deere (NYSE: <a class="ticker" href="/stock/de#NYSE">DE</a>) over the past six months.

See also: <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/02/2326596/asian-stocks-surge-higher-on-greek-hopes">Asian Stocks Surge Higher on Greek Hopes</a>

Makita (NASDAQ: <a class="ticker" href="/stock/mktay#NASDAQ">MKTAY</a>) is more than 17% higher than a month ago despite pulling back 1.5% in the past week. The company makes and sells drills and other power tools worldwide. It is based in Anjo City, has a market cap of $5.3 billion and its dividend yield is 1.6%. The P/E ratio is less than that of larger competitor Stanley Black &amp; Decker (NYSE: <a class="ticker" href="/stock/swk#NYSE">SWK</a>), and its operating margin is better as well. But over the past six months, the stock has underperformed Black &amp; Decker.

Mitsubishi UFJ Financial Group (NYSE: <a class="ticker" href="/stock/mtu#NYSE">MTU</a>) shares are trading up more than 16% year to date despite a pullback late last week along with other regional financials. It posted higher net income recently due to lower credit costs and an increase in loans and deposits. The market cap is $69.1 billion and the dividend yield is 1.5%. Over the past six months, though, the stock has underperformed peers Mizuho Financial (NYSE: <a class="ticker" href="/stock/mfg#NYSE">MFG</a>) and Sumitomo Mitsui Financial (NYSE: <a class="ticker" href="/stock/smfg#NYSE">SMFG</a>).

Nidec (NYSE: <a class="ticker" href="/stock/nj#NYSE">NJ</a>) is trading almost 11% higher year to date but has pulled back slightly in the past week. The board recently approved the repurchase of up to 3 million of this electric motor producer's shares. The Kyoto-based company has a dividend yield of 0.6%, a market cap of $13.9 billion, and a long-term EPS growth forecast of 15.1%. Over the past six months, the stock has outperformed the likes of NetApp (NASDAQ: <a class="ticker" href="/stock/ntap#NASDAQ">NTAP</a>) and Panasonic (NYSE: <a class="ticker" href="/stock/pc#NYSE">PC</a>).

Toyota Motor (NYSE: <a class="ticker" href="/stock/tm#NYSE">TM</a>) shares are trading more than 18% higher year to date despite a pullback late last week on news of an investigation into reports of fires in the driver side doors of some of its cars. Toyota's dividend yield is 1.3%, the market cap is $135.1 billion and the long-term EPS growth forecast is 24.0%. The automaker raised its EPS and sales outlooks last week. The stock's performance has been in line with General Motors and Honda over the past six months.

See also: <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/02/2322122/how-to-profit-from-japans-stealth-currency-intervention">How to Profit from Japan's Stealth Currency Intervention</a>

<div id="action-items">ACTION ITEMS:

Bullish: Investors interested in exchange traded funds focused on Japan might want to consider the following trades:

<ul><li>ProShares Ultra MSCI Japan (NYSE: <a class="ticker" href="/stock/ezj#NYSE">EZJ</a>) is more than 11% higher year to date.</li>
<li>SPDR Russell/Nomura PRIME Japan (NYSE: <a class="ticker" href="/stock/jpp#NYSE">JPP</a>) is more than 7% higher year to date.</li>
<li>WisdomTree Japan Hedged Equity (NYSE: <a class="ticker" href="/stock/dxj#NYSE">DXJ</a>) is more than 6% higher year to date.</li>
<li>iShares MSCI Japan Index (NYSE: <a class="ticker" href="/stock/ewj#NYSE">EWJ</a>) is more than 5% higher year to date.</li>
</ul>Bearish: Traders may prefer to consider these alternative positions:

<ul><li>ProShares UltraShort MSCI Japan (NYSE: <a class="ticker" href="/stock/ewv#NYSE">EWV</a>) is more than 6% higher than a year ago.</li>
<li>ProShares UltraShort Yen (NYSE: <a class="ticker" href="/stock/ycs#NYSE">YCS</a>) is about 1.5% higher year to date.</li>
</ul>Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.</div>

WisdomTree Trust Japan Total Dividend Fund

MKTAY

NTAP

SMFG

Seven Japanese Stocks Up More Than 10% Year to Date

Every one of Asia's major stock markets ended trading on Wednesday higher, as hopes of a deal between Greece and its creditors were on the rise.

Asian stock markets have been sensitive to any news coming out of Europe regarding the financial crisis that the region has been experiencing. A Greek default could be disasterous to the eurozone economies that are major trading partners of Asia's export driven economies.

Here's how some of the biggest stock markets in Asia performed on Wednesday:

The SSE Composite Index of Chinese stocks jumped 55.63 points, or 2.43%, during trading in Shanghai to end the day at 2,347.53.

The Taiwan Capitalization Weighted Stock Index, or the TSEC weighted index, climbed 162.47 points, or 2.11%, to 7,869.91 during Wednesday trading in Taipei.

The Hang Seng Index of Hong Kong traded stocks rose 319.27 points, or 1.54%, to 21,018.46 on Wednesday.

The KOSPI Composite Index of of Korean stocks was up 22.14 points, or 1.12%, to 2,003.73 by the end of the trading on Wednesday in Seoul.

The Nikkei 225 index of Japanese stocks moved 98.07 points higher, or 1.10%, to end Wednesday trading at 9,015.59.

 

<div id="action-items">ACTION ITEMS: Bullish: Traders who believe that a Greek default will be avoided might want to consider the following trades: <ul><li>If Greece avoids a default, the outlook for European economies will improve greatly, which would also improve the outlook for major Asian exporters like China, Japan and South Korea. Investors who want exposure to a wide range of these countries stocks should consider ETFs like the iShares FTSE China 25 Index Fund (NYSE: <a class="ticker" href="/stock/fxi#NYSE">FXI</a>), the iShares MSCI Japan Index Fund (NYSE: <a class="ticker" href="/stock/ewj#NYSE">EWJ</a>) and the iShares MSCI South Korea Index (NYSE: <a class="ticker" href="/stock/ewy#NYSE">EWY</a>). These three ETFs could climb higher if the European Union avoids any defaults.</li></ul><ul><li>Investors who are more interested in individual stocks might consider Toyota Motor Corporation (NYSE: <a class="ticker" href="/stock/tm#NYSE">TM</a>), Baidu.com (NASDAQ: <a class="ticker" href="/stock/bidu#NASDAQ">BIDU</a>) or LG Display (NYSE: <a class="ticker" href="/stock/lpl#NYSE">LPL</a>). Each of these stocks will have significant upside if Asia's economic outlook improves.</li></ul>Bearish: Traders who believe that even if Greece avoids a default this week, the country is just delaying the inevitable may consider alternative positions: <ul><li> The ProShares Ultrashort FTSE China 25 (NYSE: <a class="ticker" href="/stock/fxp#NYSE">FXP</a>) and the ProShares UltraShort MSCI Japan (NYSE: <a class="ticker" href="/stock/ewv#NYSE">EWV</a>) could both move higher if Greece eventually defaults. Greece has been inching closer and closer to default for more than a year now and each step of the way it has secured more concessions. Eventually, European leaders might say that enough is enough. If that were to occur, Asian stock markets could plummet.</li></ul>Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.</div>

BIDU

Asian Stocks Surge Higher on Greek Hopes

Japan's Finance Ministry confirmed on Tuesday that it had conducted stealth interventions in the foreign exchange markets in November of last year in an attempt to prevent the Japanese yen from climbing any higher.

The Finance Ministry reported that it secretly sold 1.02 trillion yen ($13.3 billion) in the days following a massive 8.07 trillion ($105.4 billion) October 31 intervention that was done after the Japanese yen reached a post World War II high of 75.35 yen to the United States dollar. The 1.02 trillion yen stealth intervention was done in order to ensure that the effects of the earlier intervention did not quickly disappear.

As investors lose confidence in the economies of the European Union and even question whether or not the eurozone can survive, they have been been moving funds into currencies that are considered safe havens, like the Japanese yen and the Swiss franc. The Swiss and the Japanese have long complained that their currencies are artificially high and that their exports are suffering because their business' products are becoming more expensive for their international customers.

A rising currency is of particular concern to Japan because the Japanese economy is heavily dependent on exports and is still trying to recover from the disastrous tsunami and earthquake that struck Japan last year. Any increase in the value of the yen can cut significantly into the profits of important Japanese exporters like Toyota Motor Corporation (NYSE: <a class="ticker" href="/stock/tm#NYSE">TM</a>), Sony (NYSE: <a class="ticker" href="/stock/sne#NYSE">SNE</a>) and Honda (NYSE: <a class="ticker" href="/stock/hmc#NYSE">HMC</a>) and undermine Japan's economic recovery.

By conducting covert currency interventions, the Japanese government can make it more difficult for currency traders to try to predict the movements of the Japanese yen against other currencies like the United States dollar. The Japanese government has threatened intervention in the past and Japanese Finance Minister Jun Azumi said that he was not ruling out any options that could be used to prevent the Japanese currency from rising further, so more stealth interventions could be on the way if the yen climbs higher.

Although the news that Japan was willing to intervene in the currency market could have sent Japanese stocks climbing, the market might have been more concerned over the fallout from a possible Greek default. The Japanese NIKKEI 225 index of Japanese stocks ended trading on Tuesday down 11.68 (0.13%) to end the trading day at 8,917.52.

 

<div id="action-items">ACTION ITEMS: Bullish: Traders who believe that news of Japan's stealth intervention into the currency market will be repeated if the Japanese yen climbs higher might want to consider the following trades: <ul><li>Traders could buy Japanese stocks like Toyota (TM), Sony (<a class="ticker" href="/stock/sne#">SNE</a>) and Honda (<a class="ticker" href="/stock/hmc#">HMC</a>) if they believe that the Japanese government will protect these exporters from a rising yen by intervening to push the currency's exchange rate down.</li></ul><ul><li>Traders who want to buy a basket of Japanese stocks should take a look at the iShares MSCI Japan Index Fund (NYSE: <a class="ticker" href="/stock/ewj#NYSE">EWJ</a>). This ETF will give them exposure to a large number of stocks and the benefits that come with diversification.</li></ul>Bearish: Traders who believe that any market intervention on the part of the Japanese government won't be able to counter the flood of funds that could pour into the Japanese yen if Greece defaults or America and Europe fall into a deep recession may consider alternative positions: <ul><li>If Japanese stocks fall because of bad news from Europe, the ProShares UltraShort MSCI Japan (NYSE: <a class="ticker" href="/stock/ewv#NYSE">EWV</a>) could be a profitable investment.</li></ul><ul><li>The CurrencyShares Japanese Yen (NYSE: <a class="ticker" href="/stock/fxy#NYSE">FXY</a>) ETF could also move higher if the Japanese government is unable to stop the yen from climbing higher in the event of a Greek default.</li></ul>Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.</div>

How to Profit From Japan's Stealth Currency Intervention

Most Asian stock markets fell on Monday as traders reacted to the news that North Korean dictator Kim Jong Il died over the weekend.

Although few foreigners will mourn the passing of the North Korean leader, the markets were understandably rattled over concerns that his passing will create a power vacuum within the country. The North Korean government has always depended on absolute rule over the country in order to maintain its position of power but it is unclear how much control heir apparent Kim Jong Un will have over the country. The son of Kim Jong Il has been being groomed to take over the leadership of the country but he isn't even thirty yet, so it's unknown how loyal senior military officials will be to the young Kim Jong Un.

South Korean financial markets are already some of the world's most volatile because of frequent negative news concerning the country's relations with its isolated northern neighbor. News of ship sinkings, artillery barrages and nuclear bomb tests by North Korea often cause the South Korean stock market and the country's currency to drop. Since little is known about Kim Jong Un, the world has no idea what to expect from North Korea's new leader.

If he manages to stay in power and continues to employ the tactics often used by his father Kim Jong Il, Kim Jong Un could resort to all sorts of provocative moves in order to show foreign governments that he is in control and must be treated with respect. More missile and nuclear bomb tests could be coming and there could even be more military confrontations between North and South Korea.

Over the past couple of years North Korea has conducted artillery barrages against a South Korean island and even sunk a South Korean naval vessel. South Koreans usually react with outrage to North Korean attacks but stop short of escalating the violence to a full scale war. If Kim Jong Un resorts to similar tactics, South Korea might feel that it's necessary to show the new leader that it will no longer allow North Korean attacks to go unanswered, which could lead to an all out war.

The American government has often called on China to do more to ease tensions on the Korean peninsula but the Chinese have their own agenda. Although it's not stated to be official policy, China does not want a reunited, nuclear-armed Korea that is friendly with Western governments and has a large well trained army sitting on its border. So China can't be counted on to be a stabilizing influence during this time of transition and it might do everything within its power to keep North Korea from reuniting with its southern neighbor.

Most indexes of Asian stocks were down significantly by the end the trading day in Asia.

The KOSPI Composite Index of of Korean stocks plummeted 63.03 points, or 3.43%%, to 1,776.93 by the end of the trading on Monday in Seoul.

The Taiwan Capitalization Weighted Stock Index, or the TSEC weighted index, dropped 151.76 points, or 2.24%%, to 6,633.33 during Monday trading in Taipei.

The Straits Times Index fell 41.13 points, or 1.55%%, to finish Monday trading in Singapore at 2,618.09.

The Nikkei 225 index of Japanese stocks was was down 105.60 points, or 1.26%%, to end Monday trading at 8,296.12.

The Hang Seng Index of Hong Kong traded stocks fell 215.18 points, or 1.18%%, to 18,070.21 on Monday.

Chinese stocks were among the best performers in Asia, as the SSE Composite Index of Chinese stocks was down just 6.60 points, or 0.30%%, to 2,218.24 during trading in Shanghai.

It's still unclear how the death of Kim Jong Il will affect the future of the two Koreas. While there is great risk of short term volatility, Kim Jong Il's passing could lead the way to reforms that open up the North Korean economy or even a reunification with South Korea.

ACTION ITEMS: Bullish: Traders who believe that the death of Kim Jong Il is a positive development might want to consider the following trades: 

<ul><li>Korean stocks like POSCO (NYSE: <a class="ticker" href="/stock/pkx#NYSE">PKX</a>) and SK Telecom (NYSE: <a class="ticker" href="/stock/skm#NYSE">SKM</a>) could climb in value after the current period of uncertainty passes. Korean stocks are taking a beating because of the risks associated with the death of Kim Jong Il. These stocks could be a bargain at their current levels if Kim Jong Il's passing proves to be a long term positive event for South Korea.</li></ul>

<ul><li>Traders who prefer the lower risk offered by diversification might want to buy the iShares MSCI South Korea Index (NYSE: <a class="ticker" href="/stock/ewy#NYSE">EWY</a>).</li></ul>

Bearish: Traders who believe that the death of Kim Jong Il will raise tensions between North and South Korea may consider alternate positions: 

<ul><li>Asian markets have reacted badly to the news, so ETFs like the ProShares UltraShort MSCI Japan (NYSE: <a class="ticker" href="/stock/ewv#NYSE">EWV</a>), the ProShares Short FTSE China 25 (NYSE: <a class="ticker" href="/stock/yxi#NYSE">YXI</a>), the ProShares Ultrashort FTSE China 25 (NYSE: <a class="ticker" href="/stock/fxp#NYSE">FXP</a>) and the Direxion Daily China Bear 3x Shares (NYSE: <a class="ticker" href="/stock/czi#NYSE">CZI</a>) could all climb higher if Asia is headed for an era of increased volatility. Tensions have also been rising between China and many of its regional neighbors over territorial disputes, so the markets will be increasingly weary over the possibility between the two Koreas or China and its neighbors.</li></ul>

<ul><li>The PowerShares DB US Dollar Index Bullish (NYSE: <a class="ticker" href="/stock/uup#NYSE">UUP</a>) could also climb higher if concerns over the North Korean succession lead to traders moving more money into US dollars.</li></ul>

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Movers & Shakers

PowerShares DB US Dollar Index Bullish Fund

How to Trade Following the Death of Kim Jong Il

On Thursday, in a survey released by the Bank of Japan, confidence <a href="http://www.benzinga.com/markets/bonds/11/12/2172441/is-japan-next">among Japanese</a> manufacturers fell more than anticipated.

Analysts had forecast a reading of negative 2, while the actual figure was negative 4. The reading may be seen as fairly significant, as Japan's economy remains dependent upon its manufacturing and exporting sector.

Japan's Nikkei dropped over 1.60% in Thursday's trading, as Japanese investors may have become concerned over the future prospects of Japan's economy.

Investors in the US appeared to brush Japan's struggles aside early Thursday morning, as futures rallied into the open. Surprising positive data coming in from Europe and a seemingly improving jobs picture in the US may have set a positive mood among US equity investors on Thursday.

In the Japanese survey, businesses cited uncertainty due to the Eurozone situation, a strong yen, and supply chain issues due to flooding in Thailand.

The first two issues the businesses have may be largely interrelated.

That is, Japan's yen may have strengthened because of issues in the Eurozone. As the crisis continues to simmer, the yen may remain strong against other currencies. For real-time updates regarding the developments in the Eurozone, traders may wish to signup for a free trial of <a href="http://pro.benzinga.com">Benzinga Pro</a>.

A strong yen may cut into the confidence of Japanese exporters, as it would make the price of Japanese goods more expensive to foreign consumers, and therefore may hurt demand.

The Bank of Japan has intervened a few times this year in an effort to drive down the value of the yen.

Following the tsunami disaster in March, the Japanese yen rose sharply. Insurance companies may have been forced to dump assets to raise cash, leading to sharp increase.

Back then, central banks around the world worked in tandem to drive down the value of the yen. Yet, the yen rapidly bounced back in the following months as the situation in Europe deteriorated.

Then, the Bank of Japan intervened again—this time unilaterally—in October. Other central banks, perhaps worried about the value of their own currencies, did not offer support.

If Eurozone issues continue to worsen, the yen may stay strong. Currency traders may prefer to hold the yen over the euro, even if the Japanese economic situation is declining. 

However, if the Eurozone situation improves, funds may shift out of the yen back to the euro, weakening the yen and improving the environment for Japan's manufacturers.

 

<div id="action-items">ACTION ITEMS: Bullish: Traders who believe that Japanese equities <a href="http://www.benzinga.com/trading-ideas/long-ideas/11/11/2141899/warren-buffett-bullish-on-japan">are undervalued</a> despite the negative economic data might want to consider the following trades: <ul><li>Buy Japanese stocks listed on US exchanges such as Sony (NYSE: <a class="ticker" href="/stock/sne#NYSE">SNE</a>) or Toyota (NYSE: <a class="ticker" href="/stock/tm#NYSE">TM</a>). Both companies are manufactures, and trad.ed higher on Thursday despite the Japanese confidence data.</li></ul><ul><li>Take a position on the Nikkei. Traders could do this through an ETF, such as MAXIS Nikkei 225 Index Fund (NYSE: <a class="ticker" href="/stock/nky#NYSE">NKY</a>).</li></ul><ul><li>Go short the yen against the euro. Most of the yen's strength may have come at the expense of the euro, and if that trend reverses, that could be an ideal currency trade.</li></ul>Bearish: Traders who believe that the Japanese economic situation is likely to decline may consider alternative positions: <ul><li>Buy the yen. Even with the yen at elevated levels, it could continue to move higher. The Bank of Japan's interventions in the past have failed to achieve their goal, leading to only a small selloff in the yen. Traders may wish to wait for another invention, and use the dip as an opportunity to take a position.</li></ul><ul><li>Short Japanese stocks. Traders can take a speculative short position through a leveraged bear ETF such as ProShares UltraShort MSCI Japan (NYSE: <a class="ticker" href="/stock/ewv#NYSE">EWV</a>)</li></ul>Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.</div>

Sign up <a href="http://www.benzinga.com/weeklyradar">for a free subscription</a> to the Weekly Radar - Benzinga's weekly newsletter highlighting technical levels and analysis for major markets for the week ahead.

Futures

Options

Eurozone Worries Crushing Japanese Confidence

Bank of Japan governor Masaaki Shirakawa warned on Monday that a surging yen and the European Union's sovereign-debt crisis were slowing Japan's post tsunami economic recovery.

The strong yen and the European financial crisis are related because as investors dump the euro, they look for what they feel are safe haven currencies like the Japanese yen and the Swiss franc. The Japanese are growing weary of the safe haven label because it has caused the Japanese currency to reach post-war highs compared to other currencies. The strong yen makes Japanese exports more expensive at a time when consumers in the United States and Europe are increasingly looking for bargains.

To deal with the rising yen, the Bank of Japan plans to increase its asset buying program by 5 trillion yen to a total of 55 trillion yen ($708 billion). The Bank of Japan relies on the asset buying program as its main economic policy tool because Japanese interest rates are already near zero percent.

The Japanese economic recovery is being further hampered by flooding in Thailand, which has had a negative impact on the operations of many of its automakers' and electronics firms' overseas operations. Although most of Thailand's capital Bangkok has avoided flooding, many of the Japanese factories based in Thailand are still under water and it could take months before some of them are fully operational again.

ACTION ITEMS: Bullish: Traders who believe that the Bank of Japan will be successful in its efforts to reduce the value of the yen might want to consider the following trades: 

<ul><li>If the yen falls, investors might choose to move funds into Swiss francs. If traders drive up the price of the Swiss franc, the CurrencyShares Swiss Franc Trust (NYSE: <a class="ticker" href="/stock/fxf#NYSE">FXF</a>) will climb higher as well.
</li></ul>

<ul><li>Japanese stocks should benefit from a falling yen as well. If the yen falls, the iShares MSCI Japan Index Fund (NYSE: <a class="ticker" href="/stock/ewj#NYSE">EWJ</a>) should climb higher as Japanese exports become more price competitive.</li></ul>

Bearish: Traders who believe that the situation in Europe is too severe for the Bank of Japan to halt the flow of funds from Europe may consider an alternate position: 

<ul><li>If the yen stays at its current levels or moves even higher, Japanese stocks could suffer. If this scenario plays out, the ProShares UltraShort MSCI Japan (NYSE: <a class="ticker" href="/stock/ewv#NYSE">EWV</a>) should climb higher as Japanese stocks fall.</li></ul>

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Strong Yen Hurting Japanese Economy

After several months of rising consumer prices, Japan's core consumer price index fell by 0.1% in October, a sign that the country might continue to suffer through deflation.

Although the Japanese government blamed the fall in prices on a cigarette tax and insurance premiums that were introduced during October a year earlier, the news could lead to a loss of investor confidence in Japan's ability to get its economy back on track. However, the fact that investors have more faith in Japan's government than the governments of countries like Greece, Italy and Spain is partially to blame for Japan's deflation problem.

The European sovereign debt crisis has caused investors to look for safe haven currencies as many are questioning whether or not the euro currency is doomed. This has caused currencies like the Japanese yen and the Swiss franc to climb higher compared to the euro. With the Japanese yen at near record highs, consumers have seen the cost of many imports fall.

Fear that the troubled eurozone economies could drag the rest of the world into recession has also hurt commodity prices, which in turn has contributed to falling consumer prices in Japan. Energy prices are one of the few segments to see cost increases and have climbed higher in Japan since the devastating earthquake and tsunami forced the government to shut down many nuclear reactors. Excluding the rising cost of energy, the October price drop would have been much greater.

The combination of a rising yen and lingering deflation could weigh on the Japanese economy for years to come. The rising yen makes Japanese exports more expensive during a time when consumers in the United States and Europe are looking for ways to save money.

The International Monetary Fund warned earlier this week that Japan needs to find a way to get its economy growing again. Otherwise, Japan might find itself in a similar position as eurozone countries like Spain and Italy that have seen their borrowing costs surge higher as investors lose confidence in them.

ACTION ITEMS: Bullish: Traders who believe that Japan's October price drop is not a sign of things to come might want to consider the following trades: 

<ul><li>If Japan's economy improves and the country experiences healthy levels of inflation, the iShares MSCI Japan Index Fund (NYSE: <a class="ticker" href="/stock/ewj#NYSE">EWJ</a>) should climb higher. The October price rise followed months of increasing prices, so Japan isn't necessarily back to its inflationary ways.</li></ul>

Bearish: Traders who believe that the latest drop in Japanese consumer prices is a precursor to years of deflation may consider an alternate positions: 

<ul><li>The ProShares UltraShort MSCI Japan (NYSE: <a class="ticker" href="/stock/ewv#NYSE">EWV</a>) will see its share price rise if Japan isn't able to get its economy growing again and prices continue to fall.</li></ul>

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Commodities

Japan's Deflation Woes Are Back

Billionaire investor and chairman of Berkshire Hathaway (NYSE: <a class="ticker" href="/stock/brk-a#NYSE">BRK-A</a>) (NYSE: <a class="ticker" href="/stock/brk-b#NYSE">BRK-B</a>) Warren Buffett said that his outlook for Japan is unchanged despite the devastation caused by this year's earthquake and tsunami and a more recent financial scandal at Japanese camera maker Olympus Corporation.

Warren Buffett made the comments during a visit to Tungaloy Corporation, a company that manufactures tools for cars and planes. Tungaloy Corporation is owned by a company that Berkshire Hathaway has a controlling interest in and is located in the Fukushima prefecture about 25 miles from the Fukushima Dai-Ichi nuclear plant that was crippled during the March 11 earthquake and tsunami in Japan's northeast. Warren Buffett was scheduled to visit the company in March but those plans were scrapped in the aftermath of the disaster that struck Japan that month.

While the financial scandal that hit Olympus Corporation after the company admitted to covering up years of losses has made many investors question the state of corporate governance in Japan, Buffett said that it could have happened anywhere in the world and the fact that it occurred in Japan didn't make him question the attractiveness of the Japanese market as a whole.

Investors have a number of ways to profit if Warren Buffett's display of confidence in the Japanese economy proves to be justified. The Japanese stock market has performed poorly this year and has recently been sinking further but if a famed value investor like Buffett thinks that Japanese companies make attractive investments, investors would be wise to listen.

Investors who want to profit from a possible Japanese turn around could do so by buying an ETF like the iShares MSCI Japan Index Fund (NYSE: <a class="ticker" href="/stock/ewj#NYSE">EWJ</a>). This ETF gives investors exposure to a large number of Japanese stocks and if the Japanese economy improves it should climb higher.

Investors who don't mind taking on more risk could also look into individual Japanese stocks like Hitachi (NYSE: <a class="ticker" href="/stock/hit#NYSE">HIT</a>), Kubota Corporation (NYSE: <a class="ticker" href="/stock/kub#NYSE">KUB</a>) and Internet Initiative Japan (Nasdaq: <a class="ticker" href="/stock/iiji#Nasdaq">IIJI</a>). The upside for investors who choose well is considerably higher than the iShares MSCI Japan Index Fund (<a class="ticker" href="/stock/ewj#">EWJ</a>) ETF.

Investors who think that Warren Buffett is wrong about Japan should take a look at the ProShares UltraShort MSCI Japan (NYSE: <a class="ticker" href="/stock/ewv#NYSE">EWV</a>) ETF. If Buffett's enthusiasm for Japanese companies turns out to be overly optimistic, the ProShares UltraShort MSCI Japan (<a class="ticker" href="/stock/ewv#">EWV</a>) could move higher as the Japanese market continues to fall.

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Warren Buffett Bullish on Japan

France was warned for the second time this week by a major credit rating agency that its valuable triple-A credit rating could be downgraded in the near future.

Standard &amp; Poor's was the latest credit rating agency to say that the eurozone's second biggest economy was in danger of being downgraded. Standard &amp; Poor's said that it would probably downgrade France's credit rating two notches to AA+ down from AAA if either of two scenarios unfolded. France could suffer a downgrade if the eurozone fell into a recession that was accompanied by rising interest rates or if the eurozone experiences a double dip recession.

With so many eurozone members enacting austerity measures to reduce their deficits, both scenarios are becoming more likely. The combination of increased taxes and reduced government spending doesn't bode well for eurozone economies like Greece, Italy and Spain. A Greek default would make matters even worse and just the possibility of a Greek default has led to many major European banks having difficulty obtaining short term financing.

European banks' short term funding problem was a factor in another warning to France earlier this week from Moody's Investors Service. European leaders have been under pressure to come up with a concrete plan to recapitalize Europe's ailing banks, which are having financing troubles because of their large holdings of the debt of Greece and other troubled eurozone countries. With the likelihood of a Greek default increasing, short term financing has dried up at some banks.

Moody's Investors Service warned earlier this week that if France took part in recapitalizing European banks, it would simply be shifting risk from the banks to taxpayers and risked seeing its credit rating downgraded. Earlier this month, the governments of Belgium, France and Luxembourg had to step in to save the Belgian-French financial institution Dexia SA from financial collapse. The three governments agreed to 90 billion euros in financing guarantees for the troubled bank and the Belgian government said that it would pay 4 billion euros to take over Dexia's Belgian retail banking operations.

One of the troubling aspects of the two downgrade warnings that France has received this week is that they were for different scenarios. Standard &amp; Poor's warning focused on the risk that the eurozone would fall into recession, while Moody's Investors Service focused on the much talked about plan to recapitalize the eurozone banking sector. As the financial situation in the European Union continues to deteriorate, each scenario is more likely. An announcement about the banking recapitalization plan is expected soon after an October 23 meeting of European leaders and could lead to a credit rating downgrade for France.

With two warnings to France in one week, the odds of a French credit rating downgrade are increasing. Many other eurozone members have been put on notice over the last year that their credit ratings were under review and a downgrade usually followed within a few months. At least one of the downgrade risk factors given for this week's warnings to France, recession or banking recapitalization, is likely to take place and there are a number of ways for investors to plan ahead in order to take advantage of the situation.

Asian stocks are very sensitive to any bad news coming out of Europe, so if France is downgraded or Greece defaults, Asian stocks could take a hit. Investors who feel that stocks like Sony (NYSE: <a class="ticker" href="/stock/sne#NYSE">SNE</a>), Taiwan Semiconductor Manufacturing (NYSE: <a class="ticker" href="/stock/tsm#NYSE">TSM</a>) and Suntech Power Holdings (NYSE: <a class="ticker" href="/stock/stp#NYSE">STP</a>) could soon be falling because of more bad news from Europe could short them. A large portion of these Asian exporters' revenues comes from trade with the European Union, so if the outlook for Europe becomes even bleaker, these stocks could see their share prices fall.

Investors who feel that Asian stocks could be headed for a fall but prefer to diversify their holdings could buy an ETF like the ProShares UltraShort MSCI Japan (NYSE: <a class="ticker" href="/stock/ewv#NYSE">EWV</a>) or the ProShares Ultrashort FTSE China 25 (NYSE: <a class="ticker" href="/stock/fxp#NYSE">FXP</a>). Each of these ETFs allows investors to short a wide range of Asian stocks from the representative country.

Other investors might feel that the situation in Europe isn't as dire as the press is making it out to be. Although the eurozone still faces many economic problems, Europe's leader s have shown a willingness to address these problems. If the efforts of European leaders like France's Nicolas Sarkozy and Germany's Angela Merkel prove successful, European stocks could see major gains. Stocks like TMS International (NYSE: <a class="ticker" href="/stock/tms#NYSE">TMS</a>) and Banco Santander (NYSE: <a class="ticker" href="/stock/std#NYSE">STD</a>) and ETFs like the iShares MSCI Europe Financials (Nasdaq: <a class="ticker" href="/stock/eufn#Nasdaq">EUFN</a>), the SPDR EURO STOXX 50 (NYSE: <a class="ticker" href="/stock/fez#NYSE">FEZ</a>) and the CurrencyShares Euro Trust (NYSE: <a class="ticker" href="/stock/fxe#NYSE">FXE</a>) have a great deal of upside potential if Europe is able to turn things around.

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How to Profit From Second Threat to Downgrade France

The alleged Iranian plot to assassinate the Saudi Arabian ambassador to the United States threatens to disturb the delicate balance of power in the Middle East. The Sunni Muslim monarchy of Saudi Arabia and the Shiite Muslim theocracy of Iran have been increasingly at odds over a number of disputes throughout the Middle East over the last few years, as the two countries vie for leadership in the Muslim world. Tensions between Saudi Arabia and Iran go back decades but the revelation of an alleged plot to assassinate the Saudi Arabian ambassador to the United States has raised the stakes of the rivalry between the two Middle Eastern powers.

If the current tensions escalate to the point of military action, the effects on the price of oil and the world economy could be great. A military conflict between Iran and Saudi Arabia might still be unlikely but there is also the possibility that Israel or the United States could use the alleged plot as an excuse to launch an attack on Iran. If either were to do so, Saudi Arabia might pressure other Muslim states to limit their criticism of any military action taken by the United States or Israel, which makes an attack on Iran even more likely.

Saudi Arabian Prince Turki al-Faisal has already stated publicly that Iran must pay a price for the alleged assassination plot, so the Saudi Arabian government might even encourage an attack on Iran. Regardless of the outcome of any military action, the markets would be spooked and as the price of oil rises, stock prices could take a serious blow.

Investors who feel that the tensions between Saudi Arabia and Iran will escalate might want to buy the United States Oil Fund (NYSE: <a class="ticker" href="/stock/uso#NYSE">USO</a>) or PowerShares DB Oil Fund (NYSE: <a class="ticker" href="/stock/dbo#NYSE">DBO</a>) ETFs. Even the hint of a looming conflict between Iran and either Saudi Arabia, Israel or the United States could push oil prices higher and these two ETFs should see their share prices surge on any news that open conflict has broken out.

Rising oil prices could also slow economic growth in the export driven Asian economies, so the ProShares Ultrashort FTSE China 25 (NYSE: <a class="ticker" href="/stock/fxp#NYSE">FXP</a>), ProShares UltraShort MSCI Japan (NYSE: <a class="ticker" href="/stock/ewv#NYSE">EWV</a>) or Direxion Daily China Bear 3x Shares (NYSE: <a class="ticker" href="/stock/czi#NYSE">CZI</a>) ETFs could all do well if Asian stocks prices fall on news of the situation between Iran and Saudi Arabia worsening.

How to Trade on Iran-Saudi Tensions Over Assassination Plot

European Central Bank President Jean-Claude Trichet warned the European Parliament in Brussels on Tuesday that the financial crisis facing the eurozone is systemic and that Europe's leaders must take decisive action in order to prevent it from escalating and spreading. Trichet will soon be stepping down from the European Central Bank and is pushing eurozone leaders to come up with a plan to recapitalize the European banking sector.

French President Nicolas Sarkozy and German Chancellor Angela Merkel have already agreed that eurozone banks will be recapitalized but Europe's leader still need to announce a formal action plan. They have delayed because some European leaders like Sarkozy are concerned that by taking on much of the banking sector's risk, eurozone governments could see their credit ratings lowered and their borrowing costs rise.

Europe is also awaiting the outcome of a vote in Slovakia to approve the European Financial Stability Facility (EFSF) expansion. Slovakia is the only eurozone country that has yet to approve the EFSF expansion that is needed in order to give eurozone officials more firepower to prevent a financial catastrophe.

There are a number of investment options to consider, depending on how the current eurozone financial turmoil plays out.

Investors could simply short the euro with ETFs like the Market Vectors Double Short Euro (NYSE: <a class="ticker" href="/stock/drr#NYSE">DRR</a>) and the ProShares UltraShort Euro (NYSE: <a class="ticker" href="/stock/euo#NYSE">EUO</a>). As long as the viability of the eurozone is in question, the euro will be under downward pressure. Although it looks like eurozone leaders will soon agree to formal plan to recapitalize the banking system, such a move could still hurt the euro as governments assume much of the risk that banks are currently holding.

Asian markets are particularly sensitive to economic news from Europe because the export driven Asian economies depend on exports to Europe for much of their economic growth. If the situation in Europe worsens with a Greek default, other troubled countries like Ireland and Portugal might consider defaulting or forcing investors to restructure the countries' debts. Even if such a scenario never occurs, just the possibility of it happening is enough to drive Asian stock prices lower.

Investors who feel that European plans to recapitalize eurozone banks won't be enough to prevent a looming financial crisis might want to short Asian stocks by purchasing the Direxion Daily China Bear 3x Shares (NYSE: <a class="ticker" href="/stock/czi#NYSE">CZI</a>), ProShares UltraShort MSCI Japan (NYSE: <a class="ticker" href="/stock/ewv#NYSE">EWV</a>) or ProShares UltraShort MSCI Pacific ex-Japan ETFs. These ETFs could climb much higher if the growth prospects for China, Japan and other Asian economies take a hit because of a worsening eurozone financial crisis. Moody's Investors Service has already placed Belgium's credit rating on review for possible downgrade because of risk that the Belgian government is taking on to support the country's banking sector.

Investors who feel that European leaders' plans to recapitalize the eurozone banking sector will effectively end much of the market turmoil in Europe might want to consider buying European financial stocks through the iShares MSCI Europe Financials (Nasdaq: <a class="ticker" href="/stock/eufn#Nasdaq">EUFN</a>), which is an ETF made up of a wide range of European financial stocks. Once the eurozone's financial crisis passes, European financial sector stock prices could move much higher.

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UltraShort MSCI Japan declares quarterly distribution of $0.0670

UltraShort MSCI Japan declares quarterly distribution of $0.0925

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ProShares UltraShort MSCI Japan -2x Shares

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ProShares UltraShort MSCI Japan

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ProShares UltraShort MSCI Japan (ARCA:EWV), Quote.Headers.trade-ideas