With Japanese stocks and related exchange traded funds rebounding over the past couple of weeks, investors will look for Prime Minister Abe’s so-called third arrow to support the market’s next leg.

The iShares MSCI Japan ETF (NYSEArca: EWJ) is up 4.5% over the past month. [Bank on Japanese Banks With This ETF]

Meanwhile, the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) has increased 4.7% and db X-trackers MSCI Japan Hedged Equity Fund (NYSEArca: DBJP) rose 5% over the past month, outperforming the non-currency-hedged EWJ after accounting for a depreciating Japanese currency. The CurrencyShares Japanese Yen Trust (NYSEArca: FXY) fell 0.4% over the past month and is down 1.3% over the past three months. [Positive Technical Signs for Big Japan ETF]

Japanese markets have been strengthening this week after a draft of Abe’s proposed regulatory reforms for his “third arrow” in the so-called Abenomics plan, writes Tom Essaye for Forbes.

The first and second arrows comprised of fiscal and monetary policy changes in 2013. The third arrow consists of regulatory reforms, which Abe plans to overhaul corporate governance, promote technology and attract private investment, reports Takaya Yamaguchi for Reuters. Abe’s official third arrow reform update will be announced later this month.

The market is watching for a planned corporate tax reform, which would help companies cut costs and bolster their stocks, along with how the General Pension Investment Fund of Japan invests its money. If the pension allocates away from Japanese debt and into foreign stocks and bonds, the fund will indirectly help depress the Japanese yen and Japanese debt prices, and potentially draw other institutions to take on riskier assets.

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