Nikkei at Attractive Levels

The Nikkei 225 is now trading at just above 8,200. This represents a 55% discount to July '07 prices and almost 40% off of July '08 prices. The best way to play the Nikkei may be to buy a Japan ETF like iShare's (EWJ). Even if the Nikkei remains flat, you will make a profit if the yen continues to decline against the dollar, because you own actual Yen-valued assets, not just an index number. The real discount, of course, is compared with 1989 Nikkei prices. Almost 20 years ago the Nikkei traded at over 38,000 at the height of the Japanese bubble. Even if it took another 20 years to reach that lofty level, investors would make about 7% annually. Of course, Japan is better treated as a short to medium term play. With the Nikkei's fall steeper than the S&P 500 and the likelihood of further yen strength, the Nikkei may be in store for a quicker and more lofty rebound.