The Bank of Japan’s loose monetary policies along with a wider rising rate differentials between the U.S. and Japan could support a depreciating Japanese yen currency over the short-term, which would bolster the export-heavy Japanese market. EWJ is not a currency hedged ETF.
Japan’s “service sector has expanded in tandem with manufacturing, suggesting that the recent run of strong factory activity has partially spurred greater business volumes for services providers. Higher volumes of new work in turn saw the service sector reporting the highest rate of increase in business activity since August 2015 during May,” according to Markit.
Boding well for Japanese stocks and the aforementioned ETFs is the Bank of Japan’s commitment to its stimulus efforts, indicating investors should not be overly concerned with speculation that improving economic data could compel BoJ to taper its easing efforts.
“Solid economic growth and rising prices have fueled speculation that the Bank of Japan (BOJ) could soon signal its intention to start trimming its stimulus. However, such talk still looks premature. BOJ governor Haruhiko Kuroda said recently that now is not the time to announce an exit strategy to its stimulus programme,” notes Markit.
For more information on the Japanese market, visit our Japan category.