ETF Investors Look to Japan's Strong Fundamentals

As investors consider international equity opportunities diversify away from potentially overvalued U.S. domestic equities, some have turned to Japanese markets and country-specific ETFs.

Many may automatically look to something like the iShares MSCI Japan ETF (NYSEArca: EWJ) to gain quick exposure to Japanese markets, but there are other options on the table.

For instance, the Xtrackers Japan JPX-Nikkei 400 Equity ETF (NYSE: JPN) is a cheap option with a 0.15% expense ratio, providing investors with benchmark exposure to the Japanese stock market by tracking the JPX-Nikkei 400 index.

JPN may be seen as a direct play on the same Japanese companies that the Bank of Japan has been buying to support its local markets. The central bank previously stated it would target Japan-listed ETFs that track the JPX-Nikkei 400 Index, the same underlying benchmark as JPN.

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The JPX-Nikkei 400 Index was launched in January 2014 as a means of revitalizing the Japanese equity market. The JPX-Nikkei 400 Index employs a rigorous screening process based on return on equity, cumulative operating profit and market capitalization to select high-quality, capital-efficient Japanese companies. The benchmark may be seen as “smart beta light,” Abby Woodham, ETF Strategist for Deutsche Asset Management, told ETF Trends in a call.