Now, there are concerns that exports to China may further decline after Beijing devalued its currency. Japanese Finance Minister Tara Aso has warned that the government is on guard if China attempts to manipulate its yuan currency any further to give its export industry a competitive advantage, according to Reuters.
“Japan would face a tough decision on how to respond if China intervenes frequently in the market,” Aso told a news conference after a regular cabinet meeting.
Consequently, large-cap Japan ETFs, which largely include major exporting companies like Toyota and Honda, may come under pressure in the ongoing currency war in Asia.
Alternatively, with the Japanese government implementing greater economic reforms, small-caps may continue to outperform. Prime Minister Shinzo Abe is currently enacting his so-called Third Arrow of structural reforms. [Japan Equity ETFs to Capture Abe’s ‘Third Arrow’ Corporate Reforms]
For more information on Japan, visit our Japan category.
Max Chen contributed to this article.