We continue to believe we may have seen a multi-year long-term bottom in the Japanese yen. The catalyst for this view is the fact Japan is now running a deficit in its trade account (see charts next two pages), compared to a consistent surplus going back to the early 1980’s. We suspect this new trade dynamic will make it increasingly difficult for Japan to fund its massive debt profile—up to 240% debt/gdp on some estimates. If so, we believe risk will finally flow into and weaken the yen. It seems to us, most of the repatriation back into Japan has already taken place, triggered by the credit crunch and Tsunami. So, on risk the yen will not receive the haven flow it has in the past.

We suggest you buy ProShares UltraShort Yen (EFT); symbol is YCS at the market. [Last Price = $43.68]

YCS has broken above its daily downtrend line going back to April 2009, and has also recently pierced the 200-day moving average on the upside.