The iShares MSCI Japan ETF (NYSEArca: EWJ) is one of the largest exchange traded funds tracking Japanese stocks and EWJ is surging this year as ex-US developed markets are outpacing the S&P 500. For example, EWJ is higher by 12%, which is well ahead of the S&P 500’s year-to-date gain of just over 9%.

Japanese equities also show more attractive valuations, compared to the pricier U.S. markers. For instance, EWJ shows a 15.42 price-to-earnings and a 1.2 price-to-book, whereas the S&P 500 index is trading at a 18.9 P/E and a 2.6 P/B.

“The focus on Japan limits diversification, but many of the fund’s holdings are major multinational firms,” said Morningstar in a recent note on EWJ. “Companies such as Toyota, Honda, and Sony are among the fund’s largest holdings and have global operations with diversified revenue streams. They also contribute to the fund’s heavier allocation to the consumer cyclical sector compared with broader international funds. This may cause Japan’s performance to differ from these broader portfolios.”

The iShares Currency Hedged MSCI Japan ETF (NYSEArca: HEWJ) and Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEArca: DBJP) are among the other well-known Japan ETFs for investors to consider. Like the aforementioned DBJP and HEWJ are currency hedged. However, EWJ and other non-hedged Japan ETFs have been impressive performers this year owing to a surprisingly strong yen.

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