Aggregate corporate earnings are aggravating Japan’s exchange traded funds(ETFs) along with the Japanese market. iShares MSCI Japan (EWJ) is down 4.1% year-to-date and iShares S&P/Topix 150 (ITF) is down 4.3% this year and is continuing to disappoint investors although trading has been on the low end of historical valuations, reports Carl Delfeld for ETFXRAY.

Year-on-year operating profits for top-tier companies rose 6% in the first half, and full-year forecasts are expected to be lower. Non-manufacturers, except banks, have an especially sad outlook where profits fell 3.4%. Domestic consumer finance is a bigger problem than sub-prime exposure.

What will be the saving grace for Japan? A catalyst for growth and higher stock prices could come from the Japanese stock market getting cheaper. Exports to China are slowing and if U.S. consumption slows down the yen will make a superior way to play Japan’s stock market.

Tags: Japan