Toyota Motor Corporation (ADR) (TM), Mitsubishi UFJ Financial Group Inc (ADR) (MTU): How Japan’s International Push Has Driven the NIKKEI 225 (NI225)’s Run

Japan’s been an investor’s dream this year, there’s been no doubt about that. With the NIKKEI 225 (INDEXNIKKEI:NI225) index up more than 38% year to date, far ahead of even strong gains out of the U.S., it’s impossible to call it anything else. The NIKKEI 225 (INDEXNIKKEI:NI225) added another 4% to its gains this week in a strong showing over the past five days.

As much as the stock market has lifted due to Japan’s recovering economy, it’s the growth of Japan’s leading companies overseas — growth helped by the success of Tokyo’s stimulus and weakening of the yen against the dollar and other major currencies — that has helped top firms and stocks rise up the charts.

Looking overseas
Exports have taken off in Japan this year as companies have looked to use the falling yen to boost their bottom lines. Currency fluctuations have an affect on every company that engages in international business, but Japan’s currency devaluation has made it better than ever for firms to spread out across the world. Economists polled by Reuters expect that Japanese exports picked up by 14.5% in August, the biggest single-month jump in three years.

However, Japan’s trade gap isn’t expected to close due to an even more drastic rise in imports. For Japan’s economy and government — one that’s struggling to get a handle on debt — a larger trade gap isn’t going to help clamp down on the budget.

It’s where Japan’s trading, too, that highlights the turn of events in this country for investors. Multinational firms across the world have flocked to China in recent years as the world’s second-largest economy has risen in the global ranks, but Beijing’s territorial scuffle with Tokyo has pushed Japanese firms elsewhere.

Automakers, in particular, have been hurt by the China-Japan war of words in recent months, as popular demand against Japanese firms has hit with a backlash against Toyota Motor Corporation (ADR) (NYSE:TM) and other leading Japanese carmakers. The company’s sales in the country fell by nearly 5% last year as American and European rivals surpassed it in market share, and while Toyota Motor Corporation (ADR) (NYSE:TM)’s improved somewhat in 2013, it doesn’t expect a complete recovery in China until the fall.

Compare that to how well Toyota Motor Corporation (ADR) (NYSE:TM)’s performed elsewhere: Toyota’s American sales skyrocketed by 23% year over year in August, with the well-known Camry model of sedan growing sales by 22% for the month. It was Toyota Motor Corporation (ADR) (NYSE:TM)’s best month in five years, and it highlights how well the falling yen, and Japan’s improved business environment, have helped the company compete overseas. It may not be working in China, but Toyota Motor Corporation (ADR) (NYSE:TM)’s found other routes for growth — routes that have helped the stock hit year-to-date gains of around 36%. If Toyota keeps up with that push in America, don’t expect this stock to give back those gains soon.