Binary Options Traders Eyeing Yen

For most of the year it was the Euro that made the front page of newspapers, but the binary options trader's attention should be on the Yen in December. Following the landslide victory in the elections, Shinzo Abe plans on reducing the independence of Bank of Japan in exchange of producing an inflation of 3%. The stocks have surged ever since and the Yen is also thriving, but the question is whether this will last or the trends will enter a reversal quickly.

Tipping Point Is Nigh
If we were to count exclusively on technical analysis, the data would suggest that the market rallies will dwindle by the end of the year. On very short-term, binary options traders could still make some money by writing this trend, but the tipping point is just around the corner and it is better to stick to options that expire relatively soon. If we throw into the mix the fundamental analysis, things don't look so bright for Japan who is the riddled by structural problems.


Japan Is Not Like U.S.
Japan can't afford to use the same quantitative easing as the United States, because it's debt to GDP ratio exceeds 200% and the demographic problems are chronic. Since Shinzo Abe based his campaign on the promise of rising inflation, there is no doubt that the Prime Minister will resort to measures that will drive inflation towards the 3% mark. The first instinct for Forex and binary options traders would be to open long-term positions against the Yen and this isn't necessarily a bad idea.
By weakening the Yen, the government will make some Japanese products more competitive, so it might be a good idea to bet on Nintendo, Panasonic or Sony stock. The main problem is that the strategy itself is not sustainable, because the benefits of increasing competitiveness for the most popular Japanese products will be offset by higher costs of energy and food. These goods are imported and the prices are already reaching dangerous levels, so it wouldn't be surprising if the inflation targets will be lowered in 2013.

Bank of Japan hopes to fix the problem on the short-term by selling bonds, but with the number of young people dwindling, there are simply not enough buyers. Interest rates below 1% are not acceptable for foreign investors, but rising these rates can bring Japan to the brink. The bottom line is that traders should bet against a continued rise in Japanese stocks especially now that they benefit from great entry points.