Confidence is on the down side among big Japanese manufacturers, setting a mellow mood, and low morale for related exchange traded funds (ETFs).

The recent fall was less than expected, and capital spending plans were weaker than anticipated, yet not quite as bad as economists had thought during the initial wake of the credit crisis. Overall, the Japanese economy is slow, but not as slow as had been feared.

Japanese government bonds advanced, pushing the 10-year yield down over concern of a slowing economy. A downgraded outlook and revision for the assessment for the fiscal year may materialize. Theresa Barraclough for Bloomberg reports that the yield on a 1.8% bond due June 2018 fell 0.002% to 1.655%.

While Japan has slowed some, it’s still faring better than some of its Asian counterparts.

While the Nikkei 225 Stock Average has been on its longest losing streak in 54 years, it’s still the top performer in Asia’s largest equity markets, report Masaki Kondo and Makiko Kitamura for Bloomberg. But Japanese stocks have avoided the region’s biggest losses, and the country’s inflation rate is less than one-fifth that of China’s and India’s.

The iShares MSCI Pacific ex-Japan (EPP) is down 11.4% over the last three months and 15.3% year-to-date, while the iShares MSCI Japan Index (EWJ) is down 9.7% in the last three months and 7.4% year-to-date.

Other ETFs giving exposure to the country include:

• BLDRs Asia 50 ADR Index (ADRA), down 12.3% year-to-date
• iShares S&P Asia 50 Index (AIA), down 14.7% year-to-date
• PowerShares FTSE RAFI Japan Portfolio (PJO), down 11.2% year-to-date
• WisodmTree Japan Total Dividend Fund (DXJ), down 4.1% year-to-date

Tags: Asia, Bond ETFs, Japan