Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Sony Corporation (ADR) (SNE), Toyota Motor Corporation (ADR) (TM): Three Stocks for Japan’s Abenomics

Sony Corporation (ADR) (NYSE:SNE)Japan’s Prime Minister Shinzo Abe won a decisive victory on Sunday. His Liberal Democratic Party now controls both houses of Japan’s parliament, giving Abe a mandate to transform Japan.

A big part of that transformation will be centered on Japan’s economy. Abe has steadfastly promised to break the island nation out of its decades-long struggle with deflation.

Since Abe took office, Japanese stocks have been on a tear. But with the recent election outcome strengthening his base of power, Japanese stocks could still move higher from here.

The three arrows

Abe’s plan to revive Japan’s economy is based around “the three arrows.” They are:

  1. A more aggressive Japanese central bank
  2. More government spending on infrastructure projects
  3. Business (labor, regulatory) reform

All three could support Japanese stocks. In fact, investors have already seen how much the Bank of Japan can influence the country’s Nikkei 225 stock index. Year-to-date, the index is up over 40%, largely due to the Bank of Japan’s explicit inflation target.

The other two could be more difficult, but with Abe consolidating power, he has a better shot at pushing them through. The net effect could be to stimulate Japan’s business activity, and make Japanese companies more profitable.

Sony Corporation (ADR) (NYSE:SNE) is in the midst of a turnaround

Japanese electronics giant Sony Corporation (ADR) (NYSE:SNE) is in the midst of a turnaround. The company is attempting to update its products and restructure its operations so that it is better able to compete with its South Korean rivals Samsung and LG.

Shares of Sony Corporation (ADR) (NYSE:SNE) have outperformed the Nikkei 225 — they’ve more than doubled this year!

Much of that is likely due to Abe’s actions. Japan’s currency, the yen, has weakened significantly against the dollar. Last fall, the yen was trading at about 80 per US dollar; today, it’s around 100.

That weaker currency gives Sony Corporation (ADR) (NYSE:SNE) the edge — its electronics appear cheaper to foreign buyers.

There’s also the Dan Loeb effect. The activist investor has been pressuring Sony Corporation (ADR) (NYSE:SNE) to do a partial spinoff of its entertainment division. Loeb believes that it’s undervalued, and that the unit would perform better if management had a bigger stake in the outcome.

Traditionally, activist Americans have a difficult time getting their way in Japan. But with Loeb fresh off a big Yahoo! Inc. (NASDAQ:YHOO) win, perhaps he’ll be successful with Sony Corporation (ADR) (NYSE:SNE).

A weaker yen could give Toyota Motor Corporation (ADR) (NYSE:TM) the edge

As with Sony’s electronics exports, a weaker yen could benefit Toyota Motor Corporation (ADR) (NYSE:TM)’s cars. Last week, at CNBC’s Delivering Alpha Conference, hedge fund manager Mark Kingdon praised the Japanese auto stocks, noting that they would benefit strongly from Abenomics.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.