Investing in Japan's Recovery

Brittney Barrett  |

The extent of the damage inflicted on Japan from the two earthquakes, tsunami and resultant nuclear disaster remain to be seen. If there’s one thing for certain though, it’s that the nation needs to be rebuilt and that there is considerable profit potential for people who invest wisely in that reconstruction process.

The World Bank is estimating repairs will cost roughly $235 billion with the Japanese government offering estimated of $309 billion on non-economic losses alone. Japan is prepared, despite debt challenges, to do everything they can in order to get their repairs and their nation back on track. The work will be extensive and long and as an investor there are a multitude of avenues to pursue here.

Standard & Poor’s illuminated some areas that will reap the financial benefits from the recovery. The Japanese economy, the world’s third largest, is expected to grow 3% as a result of the disaster. Energy will be among the foremost sectors to benefit from this. Japan is already the world’s third largest oil consumer, now with nuclear power shut down and more energy expenditures alongside new construction, the amount of crude and imported crude will only go up. Energy in the U.S., the world’s number one consumer of oil, recently took a hit as high prices proved to slow demand, but once Japanese construction begins, there will be no opportunity to wane demand in the midst of high prices.

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Energy stocks listed by the S&P include Exxon Mobil Corp. (NYSE: XOM). Exxon Mobile is a huge refinery in Japan. The S&P additionally listed Tesoro Corp (NYSE: TSO) and Valero Energy (NYSE: VLO) as examples of companies that might have to export more refined fuel in the event Japan’s own refineries and regular suppliers fail to support internal demand. Exxon; however, may prove the best bet as it is less tied to American oil volatility.

Building materials are also an obvious choice for a contender in term of companies that will see greater demand for their products during this time. ETFs with strong ties to construction firms should be investigated as possible options, particularly First Trust ISE Global Engineering and Construction Index Fund (NYSE: FLM) and PowerShares Dynamic Building & Construction Portfolio (NYSE: DBC), according to S&P recommendations. Caterpillar Inc .(NYSE: CAT ) is also prominent in Japan and has already been making significant gains in anticipation that it will become involved in the Japanese construction. There are several ETFs with considerable positions in the company including the Industrial Select Sector SPDR Fund (NYSE:  XLI), which has been on the rise in recent weeks. Dow Jones US Industrial Sector Index Fund (NYSE: IYJ) also hold a  position in Caterpillar.

Energy, building materials and construction equipment will be the primary areas in the market that will profit from the repairs according to the report.



DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


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