Exchange traded funds that invest in Japanese stocks were caught up in Monday’s global sell-off as the Eurozone debt crisis continues to bubble over.
The iShares MSCI Japan Index (NYSEArca: EWJ) slipped 1.7% amid increased speculation that Greece will default.
“Germany and France’s commitment to continue supporting Greece’s European Union membership diminishes the likelihood that it will be allowed to default,” Tim Shroeders of Pengana Capital Ltd. in Melbourne, said, on BusinessWeek. “If Greece avoids default, it lessens any flow-on impact through the global banking system, which in-turn is positive for Asian stocks.”
Any recovery in Japan is dependent upon healthy growth in the U.S. and Europe. Export demand is key for the economy to come back to life after the devastating earthquake and tsunami.
“Overseas demand may fall more than initially expected as the recovery in U.S. and European economies slows. That may weigh on Japan’ recovery,” BOJ board member Ryuzo Miyao said, on Reuters. [Japan ETF Lower After Moody’s Downgrade]