Why Worst May Be Over for Japan's ETFs | ETF Trends

Japan is well-acquainted with the effects of deflation and the recent financial crisis has left the country quite shaken. But it isn’t just the Japanese economy and exchange traded fund (ETF) that are left sweating.

First, the better news:

  • The Japanese government claims that the worst of the recession is over as overseas demand and a series of economic stimulus measures have helped the ailing economy, reports Takashi Mochizuki for The Wall Street Journal. By the end of March, the country’s debt is expected to reach 163% of GDP.
  • The trade surplus widened for the first time in 20 months for June, reaching $5.4 billion from $1.1 billion a year earlier.
  • Industrial production increased 5.7% in May.
  • It is projected that the GDP may rise 0.5% in 2010 after shrinking 3.3% in fiscal 2009. Japan’s GDP is around 70% of pre-financial crisis levels.

But the country still faces worsening employment conditions, which stood at 5.2% in May, falling consumer prices and possible further economic declines in overseas economies. Some analysts think unemployment could rise above 6%. Officials also fear a possible relapse into deflation since the CPI has fallen for three consecutive months.

In lighter news, too-hot offices might have added to the economic slowdown. Japan initiated a “Cool Biz” policy, which is part of a plan to cut greenhouse emissions by 6% in 22 years starting in 1990, writes Masatsugu Horie for Bloomberg. The policy recommends that companies to set air conditioners at 82 degrees Fahrenheit. That led to perspiring and disgruntled workers. It is estimated that the policy reduced economic growth by $6.9 billion or 0.13% of Japan’s GDP in 2008.

  • iShares MSCI Japan Index (EWJ): up 1.5% year-to-date

ETF EWJ

For more information on Japan, visit our Japan category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. 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.