Markets

Nikkei Hits fresh 15-Year High: 3 Japan ETFs to Buy - ETF News And Commentary

Japan's Nikkei hit a fresh 15-year high on Wednesday as the Bank of Japan (BOJ) kept its monetary easing program unchanged. Following its two-day policy meeting, BOJ announced that it will continue to purchase government bonds and assets of 80 trillion yen per year. Also, BOJ noted that the world's third-largest economy is in a "moderate recovery trend."

However, it is speculated that the bank may opt to enlarge the quantitative easing program at a meeting on April 30, as the inflation rate declined to zero in February. The BOJ governor Haruhiko Kuroda blamed the decline in oil prices as one of the culprits for deflation. However, weak consumer spending also dragged down the inflation rate.

Japan has been making headlines since the latter half of 2014. Last year, Kuroda had stepped up the ambitious program launched by Prime Minister Shinzo Abe to resuscitate the Japanese economy. The Central Bank boosted its asset buying program to 80 trillion yen a year at October end from the previous rate of 60-70 trillion yen in the hope of a quick turnaround (read: 2 Hedged Japan ETFs to Buy After the Surprise BOJ Stimulus ).

Is Economy Recovering?

Expansion in BOJ's asset buying program had an immediate impact on the economy in the fourth quarter. Japan recovered from the recession seen in the third quarter to post gross domestic product growth of 2.2% in the final quarter of 2014. The world's third-largest economy had slipped into a technical recession in the preceding quarter. The economy shrank 1.6% annually in the third quarter after plunging 7.3% in the second quarter (read: ETFs to Watch on Japan Recession Shocker and Snap Election ).

Meanwhile, the massive stimulus program devalued the Japanese currency against major currencies, which in turn boosted the country's export. According to data released by Japan's finance ministry, exports rose at a pace of 2.4% in February, witnessing gains for the sixth consecutive month. Also, a surge in exports was one of the main contributors to the GDP growth witnessed in the fourth quarter. Notably, yen dropped to the lowest level in more than seven years in early March but the trend seems reversing in recent weeks.

Though Japan's industrial production contracted in February, strong growth in exports will likely boost industrial production in the coming months, thereby leading to better job prospects and higher wages.

3 Japan ETFs to Bet On

Japan equities have been rallying this year as they did over the last one year despite many concerns. The investment climate in Japan might be profitable and investors may look into the following three Japan ETFs to strengthen their portfolio (read: 3 Top Ranked Hedged Japan ETFs in Focus ).

WisdomTree Japan Hedged Equity ETF ( DXJ )

This product tracks the WisdomTree Japan Hedged Equity Index, holding 328 securities in its basket. This product looks to give investors exposure to broad Japanese markets while mitigating the fluctuations of the yen. The fund charges 48 bps in fees. It is a large cap centric fund and invests 35.1% of assets in the top 10 holdings.

Sector-wise, Consumer Discretionary takes the top spot at one-fourth share while Industrials, Information Technology, Financials and Materials also have double-digit allocation. DXJ is a popular and actively traded ETF with AUM of about $1.6 billion and average daily volume of nearly 6.3 million shares. The fund has a Zacks ETF Rank of 1 (Strong Buy) with a Medium risk outlook and has a year-to-date return of 14.8%.

Deutsche X-trackers MSCI Japan Hedged Equity ETF ( DBJP )

This fund looks to track the MSCI Japan U.S. Dollar Hedged Index, which provides exposure to Japanese equity markets and hedges the Japanese yen to the U.S. dollar by selling Japanese yen forwards. The product holds 315 securities in its basket and has so far managed assets of about $954.8 million. This large cap centric fund has moderate daily volume of 200,000 shares a day (read: As Dollar Continues to Strengthen, Time for Hedged Currency ETFs? ).

Sector-wise, Consumer Discretionary occupies the top position with around 22.4% share, followed by double-digit allocation to Industrials, Financials and Information Technology. It has an expense ratio of 0.45% and a year-to-date return of 14.6%. The fund has a Zacks ETF Rank of 1 (Strong Buy) with a Medium risk outlook.

MAXIS Nikkei 225 ETF ( NKY )

This fund tracks the Nikkei 225 index and holds about 225 stocks in its basket. Here, Fast Retailing takes the top spot with 9.4% share while other securities hold less than 5.5% share in the portfolio. Sector-wise, Consumer Discretionary occupies the top position with around 22.8% share, followed by double-digit allocation to Industrials and Information Technology.

The fund has amassed $96.6 million in its asset base while average daily volume is moderate at around 197,000 shares. Expense ratio came in at 0.50%. The product has a Zacks ETF Rank of 2 (Buy) with a Medium risk outlook and a year-to-date return of 15.2%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

WISDMTR-J HEF (DXJ): ETF Research Reports

DEUTS-XT MS JPN (DBJP): ETF Research Reports

MAXIS-NIK 225 (NKY): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

DBJP DXJ

Other Topics

ETFs

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More