WisdomTree Japan Hedged Equity (NYSEArca: DXJ), the top-selling ETF this year, has tumbled this week along with Japanese stocks. The fund’s losses have been compounded by its currency-hedged strategy and a stronger yen.
DXJ is down over 6% for the week. The ETF has been a popular vehicle for investors positioning for higher Japanese stocks and a weaker yen. The fund has gathered net inflows of more than $9.3 billion this year, according to IndexUniverse data.
DXJ surged earlier this year following the election of Japanese Prime Minster Shinzo Abe and on unprecedented measures from the Bank of Japan designed to stoke inflation and jumpstart the economy.
The Japan ETF was down for the third straight session on Friday. The fund hedges its currency exposure to the Japanese yen. Rival ETF iShares MSCI Japan (NYSEArca: EWJ) is down nearly 5% this week. CurrencyShares Japanese Yen Trust (NYSEArca: FXY), which tracks the movement of the yen versus the U.S. dollar, is up over 2%.
“June figures showing the first increase in Japan’s consumer price index in over a year did little to cheer the market. The rise is an indication that the Bank of Japan is starting to gain some traction in pushing prices up, in line with its goal of pulling Japan out its deflationary malaise,” reports WSJ.com’s MarketBeat blog.