It is a familiar script. The Bank of Japan makes a major monetary easing announcement, as it did last Friday, the yen tumbles and global investors rush to exchange traded funds holding Japanese stocks.
Last Friday, BOJ unexpectedly boosted its annual target for expanding the monetary base to 80 trillion yen from 60 to 70 trillion yen while Japan’s Government Pension Investment Fund, which holds about $1.1 trillion in assets under management, increased its allocation to Japanese and overseas equities to 25% each, up from 12% each, and cut down its domestic bond allocations to 35% from 60%. [BOJ Boosts Japan ETFs]
On their own, each announcement would have been likely to drive some new cash to Japan ETFs. In tandem, those headlines have stoked a massive amount of inflows to an array of Japan ETFs, including the largest listed in the U.S., the iShares MSCI Japan ETF (NYSEArca: EWJ).
Since last Friday, EWJ, the largest single-country ETF, has added nearly $560 million in new assets while volume has frequently been triple or quadruple the daily average, according to BlackRock data.
News of additional BOJ stimulus has the dollar/yen currency pair flirting with 115 with some forex market observers forecasting a run to 120.
Of course that is good news of yen hedged ETFs, including one of the group’s newest competitors, the iShares Currency Hedged MSCI Japan ETF (NYSEArca: HEWJ).