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Why Japan's Big Move Means the Euro Is Going Lower

By Justice "Jack Sparrow" Litle, cofounder, Mercenary Trader
Monday, November 3, 2014

Last week, the Bank of Japan announced an incredible monetary stimulus plan.
It sent Japanese stocks to seven-year highs... and it sent Japan's currency, the yen, to multiyear lows.
The Bank of Japan is dead set on creating inflation and stimulating its economy. And although you're not hearing it in the mainstream press, this is big news for Europe. Here's why...
Japan and Germany are direct competitors in high-end manufacturing exports. They are the big dogs of selling high-dollar, high-tech machinery and equipment to the rest of the world.
With Japan taking steps to dramatically weaken its currency, Team Japan just got a big leg up against Team Germany in a very high-stakes game. A weaker currency means Japan's manufactured products will be cheaper than Germany's manufactured products.
That means the German economy is going to take another hard whack as markets favor Japan's cheaper manufactured products... even as the global economy is already slowing...
Eventually, and perhaps sooner rather than later, Europe is going to be FORCED to do what Japan did.
The European Central Bank will be FORCED to go nuclear in efforts to stimulate the moribund eurozone and weaken the euro (to help make eurozone exports more competitive).
And when we say FORCED, we are talking loaded-gun-to-the-head type of forced. Ignore reality long enough, and it doesn't just tap you on the shoulder... it hospitalizes you or kills you.
It does not matter how much Germany hates it. The longer that Europe waits to take stimulative-crisis measures, the worse the situation becomes. And now the time table has been sped up by Japan.
A too-strong euro as the eurozone slips into deflation is a bigger and bigger liability by the day. This means the European Central Bank has no choice but to forcefully devalue the euro.
The mainstream press isn't reporting it... but Japan's devaluation efforts will force Europe to do the same. That means the euro is going lower.
Justice Litle

Further Reading:

"Japan's government is taking its boldest steps of economic stimulus in decades," Steve Sjuggerud wrote last year. Shinzo Abe and his friends are doing "whatever they can to devalue the yen and send Japanese stock prices much, much higher..." Learn more about "Abe's Revenge" right here.
We've already seen big gains in Japanese stocks this year. But according to one of the best investors in the world, Japanese stocks could soon have tailwinds pushing them even higher. Get all the details here.

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Market Watch
Symbol Price
S&P 500 2012.24 +0.9% +14.6%
Oil (USO) 30.57 -0.6% -11.9%
Gold (GLD) 112.44 -2.4% -12.0%
Silver (SLV) 15.44 -2.4% -26.8%
U.S. Dollar 86.90 +0.9% +8.3%
Euro 1.25 -0.9% -8.0%
Volatility (^VIX) 14.47 -0.3% +5.2%
Gold Stocks (^HUI) 157.52 -4.3% -33.4%
10-Year Yield 2.33 +0.9% -8.3%

World ETFs
Symbol Price
India (IFN) 27.67 +1.8% +38.6%
USA (SPY) 201.22 +0.9% +16.7%
Israel (ISL) 16.80 -0.6% +8.5%
Taiwan (EWT) 15.70 +1.1% +10.2%
China (FXI) 39.82 +0.9% +8.0%
S. Africa (EZA) 68.51 -0.1% +7.0%
Canada (EWC) 29.85 +0.3% +3.9%
Singapore (EWS) 13.30 +1.1% -0.3%
Japan (EWJ) 12.02 +4.6% +2.4%
Lat.America (ILF) 36.57 +0.4% -5.6%
S. Korea (EWY) 58.59 -1.3% -7.0%
Russia (TRF) 12.04 -0.9% -20.2%

Sector ETFs
Symbol Price
Biotech (PBE) 49.87 -0.4% +42.7%
Health Care (IYH) 141.72 +0.5% +29.3%
Semis (PSI) 22.96 +4.3% +29.5%
Transportation (IYT) 156.63 +1.4% +26.7%
Big Tech (QQQ) 101.17 +1.2% +24.0%
Utilities (XLU) 45.38 -0.2% +21.4%
Defense (PPA) 33.59 +1.1% +18.1%
Real Estate (IYR) 74.86 +0.6% +17.5%
Financials (IYF) 86.87 +1.0% +16.2%
Industrials (IYJ) 104.56 +1.1% +12.3%
Consumer Svcs (IYC) 127.55 +0.9% +11.5%
Software (PSJ) 37.40 +2.0% +10.9%
Insurance (IAK) 48.62 +1.0% +10.2%
Basic Mat (IYM) 83.48 +1.5% +9.9%
Telecom (IYZ) 30.40 +0.9% +6.2%
Water (PHO) 25.82 +0.4% +4.6%
Media (PBS) 24.91 +1.2% +3.8%
Construction (PKB) 21.52 +0.9% +3.1%
Retail (PMR) 34.70 +1.1% +0.9%
Alt. Energy (PBW) 6.03 +2.7% -3.8%