• According to the Bank of Japan (BOJ), “Japan’s economy has started to pick up” and the economy is “likely to improve gradually,” writes Myra P. Saefong for MarketWatch. The BOJ left rates steady at 0.1%, which is not having much of a stimulative effect on economic activity.

• The Japanese Central Bank stated that public investment, exports and production are all on the increase, as stated in China View. Exports and production are expected to rise when other countries recover and begin to buy again. (Domestic industries are benefiting from new political party).

• The Central Bank has hopes that this is the beginning of a two-tiered economy based on high domestic demand and greater foreign exports. The Democratic Party of Japan is aiming to change the Japanese economy into one centered on domestic demand. (Japan’s new dominant political party).

Private consumption and housing investments remain weak. Furthermore, corporate profits, employment and income all remain depressed.

For more information on Japan, visit our Japan category.

• PowerShares FTSE RAFI Japan (NYSEArca: PJO): down 1.2% year-to-date

• iShares S&P/TOPIX 150 Index (NYSEArca: ITF): up 1.6% year-to-date

• iShares MSCI Japan Index (NYSEArca: EWJ): up 1.6% year-to-date

Max Chen contributed to this article.

Many electronic makers have come to the market with aggressive cost-cutting plans and incentive to gain back consumer dollars, as the global outlook for the market shows signs of improvement.

• Although Playstation maker Sony posted fourth-quarter losses, the company’s latest results beat analysts’ forecasts by a wide margin, reports Hiroko Tabuchi for The New York Times.

• Samsung Electronic is still the ruler; the performance of other companies couldn’t match the world’s largest maker of televisions. Samsung said profits in the most recent quarter had tripled to a record $3.14 billion as it capitalized on investment in new panel technologies and marketing. It also got a boost from a weak won, which gave it the ability to undercut Sony’s prices.

• Panasonic notched its first profit in a year as sales of DVD recorders and household appliances showed some recovery. It’s now betting on batteries for hybrid and electric cars by merging with Sanyo.

Who can grab the most market share by cost cutting and appealing to consumers?

For more stories about consumer discretionary, visit our consumer discretionary category.

• PowerShares FTSE RAFI Japan (NYSEArca: PJO): down 1.1%; holds 2.8% of Sony

• SPDR S&P International Cons Disc Sector (NYSEArca:IPD): up 55% year-to-date; holds 2.2% Sony

• iShares S&P Global Technology (NYSEArca: IXN): up 38.2% year-to-date; holds 4.2% Samsung

• iShares MSCI Emerging Markets Index (NYSEArca: EEM): up 64.5% year-to-date; holds4.3% Samsung

• iShares MSCI South Korea (NYSEArca: EWY): up 63.4% year-to-date; Samsung, 19.1%

• WisdomTree International Technology Sector Fund (NYSEArca: DBT): up 18.9% year-to-date; Panasonic is 6.2%

A weak U.S. dollar helps U.S. manufacturers, U.S. exporters and U.S. multinationals, writes Gary Gordon for ETF Expert. But a weak dollar means foreign exporters and foreign manufacturers are hurting as they try to sell to the U.S. market. (What’s so great about a weak dollar?)

For example, the strong euro is bad for business in the Eurozone. In August, exports dropped 6% from the previous month because of an appreciating euro. (More on the eurozone).

• CurrencyShares Euro Trust (NYSEArca: FXE): up 5.1% year-to-date

Japan is another country watching its currency appreciate. The Japanese yen is likely to stay stable since the island nation is heavily export dependent.

• CurrencyShares Japanese Yen Trust (NYSEArca: FXY): up 0.2% year-to-date

Both FXE and FXY are in an uptrend, tracking above their 50-day and 200-day moving averages.

As it stands, Europe and Japan don’t have much room to further decrease the value of their currencies through monetary policies since interest rates are already so low. Still, the U.S. dollar can’t go on depreciating forever.

For more information on world currencies, visit our currency category.

Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.

Max Chen contributed to this article.

South Korea’s growth in the third quarter was at its quickest rate in more than seven years, accompanying China and Singapore in reporting faster growth during the September quarter, reports Gillian Murdoch for Reuters. (How to capture China’s growth).

• iShares MSCI South Korea Index (NYSEArca: EWY)
• iShares FTSE/Xinhua China 25 Index (NYSEArca: FXI)
• iShares MSCI Singapore Index (NYSEArca: EWS)

Japan, Singapore, Hong Kong, Thailand and Taiwan all officially exited a recession in the second quarter.

• iShares MSCI Japan Index (NYSEArca: EWJ)
• iShares MSCI Hong Kong Index (NYSEArca: EWH)
• iShares MSCI Thailand Invest Mkt Index (NYSEArca: THD)
• iShares MSCI Taiwan Index (NYSEArca: EWT)

Japan, however, grew 0.6% in the second quarter – less than expected. (Small-cap plays for Japan).

Singapore’s economy expanded in the second quarter at its fastest rate in almost six years, as a result of a surge in biomedical production and construction. (Sectors pushing Singapore’s growth)

Hong Kong pulled out in the second quarter after its economy grew at a faster-than-expected 3.3% from the previous quarter. (Is Hong Kong facing a correction?)

Thailand’s economy grew 2.3% in the second quarter from the first quarter on a recovering manufacturing sector. (Reasons to watch Thailand)

Taiwan’s economy saw growth for the first time in a year during the second quarter. Officials expect rising demand from China to support the island’s recovery. (Why Taiwan’s heating up).

• iShares S&P Asia 50 Index (NYSEArca: AIA)
• BLDRs Asia 50 ADR Index (NasdaqGM: ADRA)

For more information on Asia, visit our Asia category.

Max Chen contributed to this article.

Most recently, policy makers have boosted foreign currency holdings by $413 billion last quarter, the most since at least 2003, to $7.3 trillion, report Ye Xie and Anchalee Worrachate of Bloomberg.  The currencies of choice are the euro and yen, which account for nearly 63% of new cash. Read more about using currency in your portfolio here.

The world is flush with dollars as the Obama administration shows a willingness to tolerate a weaker currency in an effort to boost exports and the economy as long as it doesn’t drive away the nation’s creditors.  This, in turn, is making the dollar less of a diversifier for investors. To add to the currency’s woes, foreign corporations and economies are starting to feel the effects of a weak dollar, as well.

From an investor’s perspective, one can play the PowerShares DB Dollar Bearish (NYSE:UDN) which is up 7.6% year-to-date.

For a more optimistic approach, one can play the Euro through the Rydex CurrencyShares Euro Trust (FXE) which is up 6% year-to-date.

As for the yen, it can be played through Rydex CurrencyShares Japanese Yen Trust (FXY) which is up 0.4% year-to-date.

By holding non-dollar-denominated assets, such as emerging market equities, investors  can hedge against weakness. iShares MSCI Emerging Markets (NYSEArca: EEM) is up 60.9% year-to-date. Read about what emerging markets can do for your portfolio here.

A weak dollar can also be hedged with commodity ETFs, including United States Oil (NYSEArca: USO) and iShares COMEX Gold Trust (NYSEArca: IAU). Dollar-denominated assets tend to become cheaper for overseas buyers, which often leads to a spike in prices.

For more stories on currency ETFs, visit our currency ETF category.

Read the disclaimer, Tom Lydon is a board member of Rydex Funds.

For full disclosure, Tom Lydon’s clients own shares of EEM.

Kevin Grewal contributed to this article.

The Democratic Party of Japan (DPJ) plans to support small- and medium-sized businesses, a major shift from the former Liberal Democratic Party’s inclination toward big businesses, comments Patricia Oay for Morningstar. In addition, Prime Minster Yukio Hatoyama is proposing stronger trade relations with neighboring Asian countries, which would further benefit Japanese businesses.

Potential investors seeking some allocation in Japan may consider broad market ETFs or small-cap ETFs, depending on where your interests happen to be.

• iShares S&P/TOPIX 150 Index (NYSEArca: ITF): up 0.2% year-to-date

• iShares MSCI Japan Index (NYSEArca: EWJ): up 1.2% year-to-date

• iShares MSCI Japan Small Cap Index (NYSEArca: SCJ): up 6.1% year-to-date

• WisdomTree Japan SmallCap Dividend (NYSEArca: DFJ): up 5% year-to-date

• SPDR Russell/Nomura Small Cap Japan (NYSEArca: JSC): up 7.5% year-to-date

Note that consumer discretionary sector accounts for around 20% weightings in broad market and small-cap Japan ETFs. The broad market portfolio includes global auto manufacturers and consumer electronic firms, whereas the small-cap portfolios contain domestic-oriented restaurants, retailers and apparel manufacturers. Industrials, materials and information technology are export-oriented. The small-cap ETFs available have similar weightings except SCJ may be more exposed to financials.

Before the economic recovery can freely come about, the DPJ has to deal with a complex bureaucracy and large budget deficit. Another potential problem is the appreciating Japanese yen against the U.S. dollar. A higher yen may be better for local businesses, but it also means more costly exports. The biggest concern is the country’s rapidly aging population.

For more information on Japan, visit our Japan category.

Max Chen contributed to this article.

The Democratic Party of Japan (DPJ), the new leading political party in Japan, wants to increase spending at home, which would help small businesses by stimulating domestic consumption, writes Roger Nusbaum for TheStreet.

Fortunately for ETF investors, iShares MSCI Japan Small Cap Index (NYSEArca: SCJ), SPDR Russell/Nomura Small Cap Japan (NYSEArca: JSC) and WisdomTree Japan SmallCap Dividend (NYSEArca: DFJ) can provide access to Japanese small-cap performance. Their expense ratios range between 0.53% to 0.58%.

Sector weightings are more or less similar for all three ETFs: industrials are around mid-20%; discretionary is about 20%; materials are mid- to low-teens. The more notable discrepancy is that SCJ has a higher weighting in financials with 18%.

Japan is still grappling with the burden of high debt, an aging population and reliance on foreign oil. The positive aspect of the country is that Japan is the world’s second-largest economy that has a high-wage work force and a well-educated populace.

• iShares MSCI Japan Small Cap Index (NYSEArca: SCJ): up 12.4% year-to-date; dividend yield is 1.55%

• SPDR Russell/Nomura Small Cap Japan (NYSEArca: JSC): up 14.1% year-to-date; dividend yield is 1.40%

• WisdomTree Japan SmallCap Dividend (NYSEArca: DFJ): up 10.2% year-to-date; dividend yield is 2%

For more news on Japan, visit our Japan category.

Max Chen contributed to this article.

The Japanese yen is gaining strength, which is putting exporters on guard because of the threat it poses. Strategist Fumiyuki Nakanishi said the dollar-yen rate and the performance of exporters would likely determine the Nikkei’s direction this week, with the ultimate goal of keeping the ratio above 1,000.

Many analysts and insiders say it is not “right” to deliberately weaken the yen through market intervention, report Colin Ng and V. Phani Kumar for The Wall Street Journal. The dollar-yen rate and the performance of exporters would likely determine the Nikkei’s direction this week.

In response, Japanese government bonds were higher as Tokyo shares dropped steeply. The stronger yen may hurt exporters, but ETF investors can capitalize in a few ways:

• CurrencyShares Japanese Yen (NYSEArca: FXY): down 0.42% year-to-date

• WisdomTree Dreyfus Japanese Yen (NYSEArca: JYF): up 0.6% year-to-date

For more stories about Japanese yen, visit our Japanese yen category.

Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.

The defeat of Japan’s long-standing conservative party, the Liberal Democratic Party (LDP), by the landslide victory of the opposition Democratic Party of Japan (DPJ) brings hopes that the political system will become more competitive, democratic and dynamic, according to BBC News. The DPJ will help steer policies away from bureaucratic and business interest that plagued the previous leading party.

The DPJ will keep committed to strong relations with the United States and may develop more friendly, long-term Sino-Japanese relations.

Major media report that the DPJ won more than 300 of 480 seats in lower house of parliament, which is more than enough to choose the next prime minister and control the national agenda, writes Tomoko A. Hosaka for The Associated Press. The Democrats vowed to expand the social safety net and reshape the economy with proposals, including a monthly $280 handout to families with children, toll-free highways, higher minimum wage and tax cuts.

Japan is currently dealing with a record 5.7% unemployment rate and spending is on the decline, compounding worries about jobs and wages. The new party also needs to address the problem of a rapidly aging and shrinking population.

• iShares MSCI Japan Index (EWJ): up 7.3% year-to-date

• PowerShares FTSE RAFI Japan (PJO): up 5.7% year-to-date

• WisdomTree Japan SmallCap Dividend (DFJ): up 9.8% year-to-date

For more information on Japan, visit our Japan category.

Max Chen contributed to this article.

The Reuters/University of Michigan Surveys of Consumers reported that its final index of confidence for August fell to 65.7 from 66.0 in July, the lowest level it has been at in the past four months.  In fact, according to the report, consumers ranked economic conditions the worst since the market’s “bottom” in March.  The good news is that the index beat analysts’ expectations of 64.5 and is above this month’s preliminary reading of 63.2, Reuters reports.

In the technology world, chip-maker Intel (INTC) increased its third-quarter revenue forecasts above Wall Street’s expectations as demand for microchips increased, indicating that business is improving.  The Santa Clara, CA-based firm announced expected sales of $8.8 billion to $9.2 billion for the quarter, up from an original anticipation of $8.1 billion to $8.9 billion and ahead of $8.55 billion analysts expected.

Additionally, Dell (DELL), the nation’s second-largest personal computer maker, announced that although consumers are coming back to the market, corporations are holding off purchasing new hardware as they continue to implement lean measures.  The Texas-based company stated that it doesn’t expect to see a turnaround in corporate business until next year.  The news from both companies sent the Technology Select Sector SPDR (XLK) up nearly 0.4% in morning trading.

Although the global economy appears to be recovering, things are not easing up in the Asia-Pacific region as the world’s second-largest economy reported the highest unemployment rate since World War II.  According to a report released by Japan’s Ministry of Internal Affairs and Communications, the nation’s unemployment rate hit 5.7% in July, a 40.2% jump from the prior year.  Additionally, Japan’s average monthly income per household declined by 2.4% in nominal terms., states John Letzing of MarketWatch.  The news sent the iShares MSCI Japan Index (EWJ) down 0.2% in morning trading.

The Dow Jones Industrial Average lost 0.9%, the S&P 500 was down 0.7% and the Nasdaq gave up 0.4% in morning trading.

For more stories on Japan, visit our Japan category.

Kevin Grewal contributed to this article.