Adding to the strength in the yen-hedged Japan ETFs, the Japanese yen currency is weakening against the U.S. dollar. The CurrencyShares Japanese Yen Trust (NYSEArca: FXY), which tracks yen movements against the dollar, fell 0.4% Wednesday and dipped 0.8% over the past week. The yen was trading down to 121.3 against the dollar.
Japanese companies are also revealing record profits at a rate not seen since before the global financial crisis, partly due to the weakening yen and robust earnings from big exporters, reports Megumi Fujikawa for the Wall Street Journal.
“Falls in the yen and oil prices helped some sectors benefit from external demand, such as auto [makers]and steelmakers,” Kayoko Ota, an analyst at SMBC Nikko Securities, said in the WSJ article. “Positive impact from a weaker yen may not accelerate this year, but if the currency stays around ¥120 [against the U.S. dollar], they can maintain solid earnings.”
Investors can also take a targeted yen-hedged approach to Japan’s industries through the WisdomTree Japan Hedged Capital Goods Fund (NYSEArca: DXJC). DXJC includes large exposure to exporters that benefit from a weaker yen, including Toyota 11.0%, Honda 7.8% and Nissan Motor 3.3%. Automobile manufacturers make up 30.8% of DXJC’s portfolio, followed by industrial machinery 22.8% and auto parts & equipment 9.6%.
For more information on Japan, visit our Japan category.
Max Chen contributed to this article.