Japan-related exchange traded funds have been flagging this year, but large institutions are starting to look at riskier equities as the so-called Abenomics fueled policies push Japanese investors to seek out higher returns.
Year-to-date, the iShares MSCI Japan ETF (NYSEArca: EWJ) has dipped 8.0%, WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) declined 9.6% and db X-trackers MSCI Japan Hedged Equity Fund (NYSEArca: DBJP) fell 11.8%.
The Nikkei 225 Index has declined 9.8% year-to-date. This year’s plunge for the Nikkei 225 has the Japanese benchmark trading at 15.9 times forward earnings, making it slightly cheaper than the S&P 500. [Japan ETFs Could Cure Summertime Blues]
Prime Minister Shinzo Abe’s economic policies is helping to shift billions of dollars of government-controlled investments into the Japanese equities as the country pulls of out a deflationary environment and pushes the economy toward growth, reports Chikafumi Hodo for Reuters.
Japan Post Insurance, the world’s fourth largest insurance company, with an equivalent of $846 billion in assets, is increasing its stake in Japanese stocks by 300 to 350 billion yen, or up $3.5 billion – more than double the amount from last year, for the fiscal year beginning in April.
Additionally, the Government Pension Investment Fund (GPIF), the world’s largest public pension with $1.26 trillion in assets, started investing billions more into stocks. Abe’s ruling party recently stated that it would change the GPIF’s staff to shift portfolio decisions.
“At a time when Japanese life insurers are conservative on Japanese stocks, it’s good to see a big investor like Japan Post Insurance moving the other way,” Shun Maruyama, chief strategist at BNP Paribas Securities, said in the article. “Combined with GPIF raising its asset allocation for Japanese stocks, this will convey the message to foreign investors that domestic investors are starting to buy Japanese stocks.”