While Japan’s export growth is slowing, investors who still want to capture an expanding Japanese economy may want to take a look at the domestic market and small-cap exchange traded funds.
Year-to-date, the WisdomTree Japan SmallCap Dividend Fund (NYSEArca: DFJ) rose 14.9%, iShares MSCI Japan Small-Cap ETF (NYSEArca: SCJ) increased 11.8% and SPDR Russell/Nomura Small Cap Japan ETF (NYSEArca: JSC) gained 12.0% while the iShares MSCI Japan ETF (NYSEArca: EWJ) was up 10.3%.
While the U.S. dollar continues to appreciate and the yen currency weakens, with the CurrencyShares Japanese Yen Trust (NYSEArca: FXY) 3.2% lower this year, a small-cap currency-hedged Japan ETF has also outperformed. The WisdomTree Japan Hedged Small Cap Fund (NasdaqGM: DXJS) advanced 17.2% year-to-date while the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) returned 10.6%.
Weighing on Japan’s large-cap category, export growth has slowed down. Japanese export was 7.6%, compared to June’s 9.5% gain, on reduced shipments of cars and electronics to Asia, Reuters reports.
“Exports to Asia look a little sluggish,” HidenobuTokuda, senior economist at Mizuho Research Institute, told Reuters. “There is still time for exports to recover, but as of now they look a little weak. I don’t think we need stimulus measures now, but this could become more likely heading into next year.”
Notably, exports rose 4.2% to China, Japan’s largest trading partner, in July year-over-year, compared to a 5.9% gain in June.