The Japanese economy is growing more quickly than expected, bolstering the appeal of Japan country-specific exchange traded funds.
Japan’s economy expanded an faster-than-expected annualized 2.4% compared to the previous quarter, reports CNBC. The economy grew 0.6% in the first quarter over the last three months of 2014.
The improved economy helped fuel a surge in the Nikkei Average to a near one-month high of 20,207.
Year-to-date, the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) gained 20.1%, iShares Currency Hedged MSCI Japan ETF (NYSEArca: HEWJ) rose 18.6% and Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEArca: DBJP) increased 18.4%. [Investors Still Like the Japan ETF Trade]
Greater private consumption is beginning to bolster Japanese gross domestic product, a positive sign in an export oriented economy.
“Consumption ought to accelerate from here. Think about it: if you’ve got 2.3 percent growth in wages, you’ve got a very, very tight job market. So everyone knows, ‘they can’t fire me, they got no one to replace me with,'” Nicholas Smith, a Japan strategist at CLSA, told CNBC. “I’ve placed a lot of weight in my portfolio in retail and that’s been vindicated so far this year. It looks as if the story is very much on track.”
The Japan-related ETFs also have a heavy tilt toward the consumer sectors. For instance, DXJ includes 24.7% in consumer discretionary and 8.9% in consumer staples. HEWJ has 22.0% in consumer discretionary and 6.4% in consumer staples. DBJP includes 22.3% consumer discretionary and 7.0% consumer staples.