Japanese stocks and related country-specific exchange traded funds were shaking off the broad sell-off in the global equities market Wednesday, as Japan’s $1.26 trillion public pension fund announced its intent to bolster stock positions.
The iShares MSCI Japan ETF (NYSEArca: EWJ) was up 0.2% Wednesday. EWJ increased 5.0% over the past month, but it is still down 3.6% year-to-date. [Bank on Japanese Banks With This ETF]
“I personally think that we need to complete [the new portfolio]in September or October,” Yasuhiro Yonezawa, head of the Government Pension Investment Fund’s investment committee, said in a Wall Street Journal article. “There’s no reason to be slow.”
Prime Minister Shinzo Abe has been pushing for the Government Pension Investment Fund (GPIF), the world’s largest pension fund, to help reinvigorate the ailing economy.
Yonezawa outlined a plan that would shift more assets into domestic stocks, foreign bonds and foreign socks by five percentage points in each categories – current allocations stand around 12% for each category in the fund’s portfolio. The pension fund would sell conservative domestic bonds, which currently make up 60% of the fund, to raise enough for the new positions.
The changes would help bolster domestic equity prices and help weaken the Japanese yen since the fund has to sell yens to purchase foreign currency-denominated securities.
If the Japanese yen continues to depreciate against the U.S. dollar, investors may also consider currency-hedged ETFs, such as the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) or db X-trackers MSCI Japan Hedged Equity Fund (NYSEArca: DBJP). Both hedged-equity ETFs try to negate the negative effects of a weaker yen currency on returns and can outperform a non-hedged Japan ETF when the yen depreciates. DXJ is down 4.6% year-to-date and DBJP is down 6.5% year-to-date. [Positive Technical Signs for Big Japan ETF]
iShares MSCI Japan ETF
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