Japanese stocks and country-specific exchange traded funds continue to advance as cheap valuations attract investors and the state and pension funds boost exposure to the domestic market.

The popular Japan hedged-equity ETF plays that capture Japanese market moves while diminishing the negative effects of a depreciating yen have outpaced U.S. markets. Year-to-date, the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) is up 10.2% and the Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEArca: DBJP) is 9.9% higher.

Additionally, Japan’s market still shows relatively cheap valuations. Japanese companies have been growing earnings as the benefits of a weaker yen feed through the bottom lines of Japan’s largest companies, reports Josh Noble for the Financial Times.

Consequently, the Topix now trades at 16.7 times forward earnings, whereas the S&P 500 Index shows a 17.8 ratio. DXJ shows a 14.6 price-to-earnings and DBJP has a 14.8 P/E.

Supporting gains in the Japanese stock market, the GPIF, the country’s pension fund, has been accumulating more stocks as it cuts down its government bond exposure. Japan’s stocks have increased almost a third since October last year when the GPIF announced new asset allocation targets that would put trillions of yen into the domestic market. [Japan ETFs Could Strengthen As Institutional Money Pours Into Equities]

Moreover, the Bank of Japan and other small pension funds have also been increasing their share of Japanese equity exposure either through direct stock purchases or ETFs. [Small Pension Funds’ Buying Spree Supports Japan ETFs]

“There’s tremendous buying power coming from the Japanese pension funds and the Bank of Japan,” John Vail, chief global strategist at Nikko Asset Management, said in the FT article. “That’s the major reason [for the rally].”