Look to the land of the rising sun:

The economy in Japan over the past year or so has been showing consistent signs of improving. The previous cycle of deflation appears to have ended and prices of most goods and services have stopped going down. Consumer confidence is starting to improve and corporate profitability has turned the corner as well. The Japanese economy has benefited from increased trade with China as well.

The Japanese economy has been hampered by a decade long fight with deflation which started in real estate and quickly spread to the rest of the economy. The extreme valuations that occurred in real estate took years to correct and over that time frame the Japanese consumer drastically reduced consumption.

Real estate prices appear to have stabilized and that has helped to embolden the consumer, this increase in consumer activity has helped to push up corporate profitability which has helped to reduce the jobless rate in the country.

All of these factors are starting to have a positive impact on the over all Japanese economy and once the psychology of deflation has turned around to one of optimism and growth the trend will last a considerable length of time.

An efficient way to get access to Japan is by utilizing Exchange Traded Funds (ETF’s) the ishares MSCI Japan Index Fund (EWJ-N) tracks a broadly based index of Japanese stocks. The top five holdings in the fund are Toyota, Mitsubishi Financial, Mizuho Financial, Sumitomo Financial and Canon Inc. The fund is quite large approximately $14 billion and very liquid with 1 billion units out standing. This is an inexpensive fund with a management expense ratio of only 0.59%.

For investors looking to diversify into a strengthening international market Japan appears to have the potential to out perform many other regions over the next 18 to 24 months.

For more information go to www.campbellreport.com