I like Japanese banks as an inflation trade. Of all the markets I look at it, it seems that changing policies could turn into a long bull market for the banks. I was particularly drawn to the relative trend change in Japanese banks to the Topix.
Of course this is only useful if the Topix is in an uptrend. Topix is down 5% this month, and banks are looking like they might break lower.
In the pro-capital, deflationary era, Japanese banks have been reliable shorts. Even better than that, they have tended to signal trouble well before the market fully appreciates the problems that are coming.
Could Japanese banks be signalling a deflationary move?
