ETFs that invest in Japan such as WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) and iShares MSCI Japan (NYSEArca: EWJ) were off more than 3% in early U.S. trading Monday and the yen rose after a manufacturing sentiment index was weaker than economists had forecast.

Japanese stocks retreated to start the second quarter as investors await a key rate decision by the Bank of Japan on Thursday.

Lackluster economic data bolsters the case for Bank of Japan Governor Haruhiko Kuroda to expand stimulus at his first policy meeting this week, Bloomberg News reports.

The quarterly Tankan for Japanese manufacturers revealed companies will reduce investment.

“Keeping expectations high will be extremely difficult for Kuroda,” said Nobuyasu Atago, principal economist at the Japan Center for Economic Research, in the article. “The new central bank leadership will probably use the Tankan result as a reason to add monetary stimulus, as they’ll argue that the BOJ shouldn’t be throwing cold water on business confidence.”

Japanese ETFs were lower Monday after a strong first quarter with DXJ gaining about 17% for the period. The WisdomTree fund was the top-selling ETF for the quarter. [WisdomTree Japan Fund Leads ETFs with ‘Amazing’ $4 Billion Inflow]

DXJ outperforms Japanese ETFs that don’t hedge their currency exposure when the yen weakens versus the dollar. However, CurrencyShares Japanese Yen Trust (NYSEArca: FXY) gained 0.6% on Monday so DXJ fell harder than unhedged rivals such as EWJ.

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