Japan ETF: Don't Count It Out | ETF Trends

Global investors are beginning to look at Japan’s stock market again, after two sleepy decades and a near collapse. Japan may not be on the minds of many invesotrs, but the exchange traded fund (ETF) iShares MSCI Japan (NYSEArca: EWJ) may find itself back the spotlight once again soon.

Hiroko Tabuchi for The New York Times reports that Japan is now one of the world’s cheapest markets and universally hated by investors. Yet, it may have the potential to be one of the strongest markets in the next five years. [Japan ETF: Can They Flourish Amid Downgrade?]

In kind, EWJ has been showing a turnaround. It’s up nearly 10% in the last three months, which is nice when you consider that it gained 12% in all of 2010. It’s also just 8.4% below its most recent high, which was reached late last year.

Edmund Klamann for Reuters reports that Japan’s economic numbers are looking better, as well. Export demand, industrial production and factory output are climbing. Job availability is at a two-year high, as well. [Japan ETFs: Call It a Comeback?]

A reason to remain cautious on this economy: According to Stanley White of Reuters, the Economics Minister Kaoru Yosano declined to comment on a cut in Japan’s rating outlook by Moody’s Investors Service on Tuesday. Moody’s changed the outlook on the Japan’s Aa2 sovereign rating to negative from stable. A strong yen has been a problem; it makes exports more expensive for foreigners. And rising oil prices? They could have a negative effect on the economy, too.

If Japan can dodge the negatives and keep the economic numbers on the right track, EWJ may have better days ahead.

Tisha Guerrero 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.