The land of the rising sun could be in a great position as the country may be able to stave off a recession with domestic demand, helping it’s exchange traded funds (ETFs) and market strengthen.

Wages rose in Japan for the fourth straight month, the best in two years, while residential investment was up in the first quarter, reports Keiko Ujikane for Bloomberg. A slowdown in exports to the U.S., their largest overseas market, and yen appreciation may not be enough to threaten the well-being of the Japanese islands.

Japan’s housing starts are on the mend after a four-decade low last year. Full-time employment has been on the rise and is replacing low-paid, part-time workers. Overall the economy should grow 1.7% in 2008, followed by a 1.5% rise in 2009. iShares MSCI Japan Index (EWJ), up 3.8% year-to-date, could see a turn around, along with iShares S&P/Topix 150 (ITF), up 4.9%. Heavyweights Toyota, Honda and Mitsubishi are among the companies holding assets in both ETFs.

Tags: Japan