There is no denying Japan exchange traded funds have, thus far, delivered strong returns relative to other non-U.S. developed market funds this year.
It is hard to quibble with the returns offered by an ETF such as the iShares MSCI Japan ETF (NYSEArca: EWJ), the largest Japan ETF by assets. EWJ is up 23.3% year-to-date and has hauled in over $5.8 billion in assets, making it the third-best ETF by that metric this year. [Investors Still Like Japan ETFs]
EWJ and rival Japan ETFs have been buoyed by a weak yen and Prime Minister Shinzo Abe’s efforts, also known as Abenomics, to reinvigorate the world’s third-largest economy while boosting inflation. [Evaluating Japan ETFs]
However, an interesting scenario has emerged over the past 90 days. EWJ has noticeably lagged the iShares MSCI EAFE ETF (NYSEArca: EFA). Over that time, EFA is higher by 10.2% compared to gain of 6.6% by EWJ.
At least one technical analyst sees the potential for a pullback in EWJ.
“EWJ has been having some difficulty with resistance at $12 to $12.20. While the Japan ETF has been making higher lows – keeping the uptrend alive, it’s been unable to make higher highs which put it into question whether buyers can keep EWJ from making a trend change,” writes Andrew Thrasher for Trader Planet.
EWJ’s 52-week high is in the $12.40 area and was made in May. Since then, the ETF has managed several closes above $12, but has been unable to stick above that important price point. On October 22, EWJ closed at $12.15, but on Tuesday the ETF closed at $11.97, marking the third time since last month EWJ has closed above $12 only to be below that level within a matter of days.
Although EWJ is not currency hedged fund, the ETF could benefit from some yen weakening. Over the past month, EWJ is up 0.4% while the CurrencyShares Japanese Yen Trust (NYSEArca: FXY) is flat.
iShares MSCI Japan ETF
ETF Trends editorial team contributed to this post.