Why Japan Is Leading the Small-Cap ETF Rally | ETF Trends

The outlook for Japan’s economy is not as doom and gloom as once anticipated, with an upgrade to exports and industrial production giving hope to the overall economic picture. Related stocks and exchange traded funds (ETFs) are on the move in response to the news.

The Japanese government upgraded its overall economic assessment for the second consecutive month on more positive news from two key sectors.

Both exports and industrial production, two engines that will help the economy get back on track, are finally on the mend. There are still outside factors that Japan cannot control, but the upgraded situation of the economy is enough to begin the upward climb, reports The Economic Times.

Takashi Mochizuki for The Wall Street Journal reports that the government’s report adds to a slew of data and analytical reports that are predicting that Japan’s economy has likely hit bottom after going through its worst recession since World War II.

The beginning of the good news has led to a small-cap rally, as the value aspect of these companies has led to better performance. Small-caps companies have more room for growth than their more established large- and mega-cap counterparts. Small-cap also companies tend to adapt to the shifting market conditions with greater ease than the much larger companies.