After Prime Minister Shinzo Abe’s ruling coalition acquired a majority in the parliament’s upper house, Japanese equities and country-specific exchange traded funds rallied on hopes that the administration would enact additional stimulus measures to support the economy.
On Monday, the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) rose 5.1%, iShares Currency Hedged MSCI Japan ETF (NYSEArca: HEWJ) increased 4.9% and Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEArca: DBJP) gained 5.0%.
The currency-hedged Japan ETFs also found support from a depreciating Japanese yen. The CurrencyShares Japanese Yen Trust (NYSEArca: FXY), which tracks the currency movement of the yen against the U.S. dollar, declined 2.3% as the yen weakened to ¥102.8 against the greenback.
Meanwhile, the non-hedged iShares MSCI Japan ETF (NYSEArca: EWJ) advanced 2.5%.
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Abe’s ruling coalition, like-minded parties and independents won a two-thirds “super majority,” Reuters reported. Abe’s Liberal Democratic Party was one short of winning a simple majority.
The win would allow his administration to push ahead with constitutional reforms, notably restraints on its military. Abe also promised to take action on the economy, with a “swift formulation of comprehensive, bold economic measures.”
[related_stories]Prime Minister Abe repeated his pledge for action on stimulus measures Monday, ordering measures to bolster domestic demand, which include plans to accelerate infrastructure like high-speed trains, reports Susanne Barton for Bloomberg.
“If they ease further, you could see the yen weaken,” Andres Jaime, a currency strategist at Barclays Plc, told Bloomberg. “It will be temporary. We wouldn’t expect it to be sustained.”
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Abe will hold a cabinet meeting to consider more than 10 trillion yen, or $98 billion, in fiscal measures.
“Should the government go ahead with economic measures, the size of stimulus could be large,” Yuji Saito, Tokyo-based head of the foreign-exchange department at Credit Agricole SA, told Bloomberg. “These expectations are spurring a surge in stocks and selling of the yen.”
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WisdomTree Japan Hedged Equity Fund