Japanese markets closed lower Monday, but on the other side of the globe, U.S.-listed Japan country-specific exchange traded funds bounced as speculators tried to catch the falling knife.
Japanese stocks plunged Monday, with the Nikkei 225 Index down 3.1%, on the yen currency’s jump to a one-and-a-half year high against the U.S. dollar, weak earnings results from big firms and ongoing concerns over the Bank of Japan’s inaction, report Kosaku Narioka for the Wall Street Journal.
The dollar was recently at ¥106.48 after falling as low as ¥106.14, the lowest since October 2014.
“The kind of yen rises we’re seeing now could have undesirable effects on the economy. We are closely watching how such market developments could affect Japan’s economy and prices,” Bank of Japan Governor Haruhiko Kuroda said, according to Reuters.
Nevertheless, the iShares MSCI Japan ETF (NYSEArca: EWJ) was 2.1% higher Monday.
[related_stories]The CurrencyShares Japanese Yen Trust (NYSEArca: FXY), which tracks the currency movement of the yen against the U.S. dollar, dipped 0.1% on Monday.
Meanwhile, currency hedged ETFs, which diminished the negative effect of a weaker yen currency, also bounced higher. For instance, on Monday, the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) rose 2.0%, iShares Currency Hedged MSCI Japan ETF (NYSEArca: HEWJ) increased 2.4% and Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEArca: DBJP) gained 2.2%.
The sharp rebound in U.S.-listed Japan ETFs suggests that investors believe the recent selling may have been over done. Over the past week, EWJ dropped 6.5%, DXJ declined 11.2%, HEWJ decreased 11.4% and DBJP retreated 11.0%.
The ongoing yen strength could continue to weigh on Japanese equities. For instance, electronic parts maker Murata Manufacturing Co. lost 13% following its projects for a dip in earnings in the fiscal year, citing a stronger currency, lower product selling prices, increased fixed costs and higher R&D expenses.
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iShares MSCI Japan ETF