“Assuming that Abenomics has not been defeated, we see no reason to become bearish on Japanese stocks, and recommend a bullish stance,” analysts at Nomurasaid in a report.
Last week, the iShares MSCI Japan ETF (NYSEArca: EWJ) and the WisdomTree Hedged Equity Fund (NYSEArca: DXJ) experienced outflows after ranking as top asset gatherers in 2013. EWJ saw $341 million in outflows, while DXJ lost $146 million. Chris Dieterich for The WSJ reports that for the month of May, all Japan stock ETFs gathered $10 billion, the biggest monthly gain recorded. [Why Japan ETFs Traded at a Discount]
The Bank of Japan has decided against any further monetary easing measures, possibly spurring hedge funds to exit positions in Japanese equities. The iShares ETF is prone to any fluctuations in the Japanese yen, which can impact returns. A rising yen is counter-productive for Japanese manufacturers because it will make their exports more expensive overseas.
In times of a depreciating yen, DXJ and the DBX MSCI Japan Currency-Hedged Equity Fund (NYSEArca: DBJP) offer currency-hedged exposure to Japanese equities. [A Closer Look at Two Japan ETFs That Hedge the Yen]
iShares MSCI Japan ETF
Tisha Guerrero contributed to this article.