Japan country-specific exchange traded funds have provided a solid performance and may continue to do so, regardless of whether the global economy continues to improve or takes another turn for the worse.

The iShares MSCI Japan ETF (NYSEArca: EWJ), the largest Japan-related ETF, has increased 4.0% over the past week and gained 7.0% over the past month.

In dollar terms, the benchmark Topix index is 8% lower since the February 12 peak, outperforming the S&P 500, MSCI Emerging Markets Index and Euro Stoxx Index, which are down 11.5%, 16.5% and 19.8%, respectively, over the same period, the Wall Street Journal reports.

During a global recovery in a faster-than-expected turnaround from the coronavirus pandemic, Japan’s electronics, information, communications services, and transportation equipment stocks that make up the lion’s share of the Topix would benefit the most.

The country’s largest stocks generate about half of their revenue from overseas markets, so they may be positioned to continue outperforming the emerging markets and European stocks as the global economy begins to rev up.

On the other hand, if the global economy takes a slower-than-expected trajectory toward recovery with another wave of COVID-19 outbreaks or a worse-than-expected economic downturn, Japanese corporations are better situated to weather the storm with their huge cash hoards. According to Bank of Japan data, nonfinancial firms were sitting on 280 trillion yen of currency and deposits as of December. The large cash stores may have also contributed to the relatively shallow sell-off in Japanese equities, compared to the rest of the world.

Furthermore, Japanese markets look attractive. Japan’s stocks show a price-to-earnings ratio for the next 12 months of about 15.7 today – EWJ was trading at a 14.3 P/E. In comparison, U.S. stocks show a 22.9 P/E ratio. According to FactSet data, Japanese markets are trading at their cheapest on record relative to U.S. markets.

For more information on the Japanese markets, visit our Japan category.