 JAPAN
Reform or Else
It's sink or swim time for Japan. The recent weakness of the yen, which is good for exports, won't be enough to get the economy going. And analysts expect the currency to climb back later this year. The government may be tempted to stoke the fire with even more spending, but it's running out of money to do so. And that might prove to be the good news. "This should force the Japanese to get back to the job of restructuring," says Mark Headley, a manager for Matthews International Funds. "They don't have any choice. It's recession or restructuring."
Investors should look for any sign that big economic reforms are on the way; the resignation or sacking of Prime Minister Yoshiro Mori would be a start. Once that sign comes, Japanese stocks certainly have a lot of room to rise. After all, the country has been in a bear market for about a decade now.
NEC
Like AVX in the U.S., NEC is a victim of the tech slump. At $105, it's 35% off its 2000 high. But Headley thinks that the outlook for electronics manufacturers is strong. Although personal computers are on the wane, loads of new handheld devices are coming on the market. Unlike Sony and other top Japanese tech firms, this is a local play. Most of NEC's sales are domestic, so it will benefit more from an economic turnaround.
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