Adding to the longer-term allure of ETFs like DBJP and DXJ is looming Federal Reserve tapering. At this point, it appears market participants are expecting tapering to arrive late in the first quarter of 2014. The U.S. “is likely to taper in 2014 and may even completely halt asset purchases by the end of next year. If the Fed does so, Japanese corporate profits would benefit from the lower exchange rate caused by a stronger dollar,” according to Market Realist.
Earlier this month, Koichi Hamada, an adviser to Japanese Prime Minister Shinzo Abe, expressed concern that the nomination of Janet Yellen to succeed Ben Bernanke as Fed chief would lead to further USD/JPY weakness (yen strength). An end to U.S. easy money and more of that policy from BoJ would alleviate that concern and likely bolster Japan ETFs in the process.
WisdomTree Japan Hedged Equity ETF
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of DXJ.