ETF Trends
ETF Trends

Japan is experiencing a recession for the first time in seven years, and there is little hope for a soft landing as the global boom has triggered the pullback, with shares and exchange traded funds (ETFs) down.

As of Monday, data displayed Japan’s economy contracted at an annual pace of 0.4% in the July-September period after falling an annualized 3.7% in the second quarter. Japan and the eurozone have dropped off into a recession following two consecutive quarters of contraction, reports Tomoko A. Hosaka for Associated Press.

Does the iShares MSCI Japan Index (EWJ) have a fighting chance to win back investors’ interest? As the world’s second-largest economy, weak export growth and cuts in corporate spending have added to the island’s slowdown. The numbers are worse then expected by analysts, as many had predicted that Japan’s $5 trillion economy would stave off a recession by posting slight growth, reports Martin Fackler for The New York Times.

Last week Germany announced they had slid into a recession, as did Hong Kong, and the United States is to follow. Downside risk to the Japanese economy are not in favor of the country due to weak export possibilities. EWJ is down 35.0% year-to-date.

Japan ETF

The Japanese yen has been on a tear lately, possibly contributing to the country’s slowdown. Since Japan is such a big exporter of goods, a robust yen hurts profits, which will then hurt the country’s stock market. That, in turn, could have a ripple effect on exchanges in the United States and Europe.

The CurrencyShares Japanese Yen (FXY) is up 14.6% year-to-date, and up 3.2% in the last month.

Japanese Yen ETF

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.