An ETF that invests in Japan but hedges its exposure to the yen has seen trading and assets spike on expectations the new prime minister will force the Bank of Japan to weaken the currency.
The rush of money into WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) has pushed the fund above $1 billion in assets.
Since Nov. 15, DXJ has posted net inflows of $352 million, according to IndexUniverse data.
Shinzo Abe, the new Japanese prime minister, has pledged to pressure the Bank of Japan to launch unlimited monetary easing to revive the economy. The move is seen as potentially bullish for Japanese stocks and bearish for the yen. [ETF for Higher Japanese Stocks and a Weaker Yen]
DXJ invests in Japan equities but hedges its currency exposure. Other ETFs such as iShares MSCI Japan (NYSEArca: EWJ) face a headwind when the yen weakens against the dollar.
CurrencyShares Japanese Yen Trust (NYSEArca: FXY) is down more than 7% the past three months. During that period, DXJ is up 12.1% while EWJ has gained 5.2%, according to Morningstar. The disparity illustrates that currency hedging can have a meaningful impact on performance.
Trading volume in DXJ has jumped in the second half of December. On Dec. 13 alone, volume skyrocketed to about 5 million shares, up from a daily average of about 300,000 shares, according to Paul Weisbruch at Street One Financial.