Japan’s economy is seeing record employment rates, and wage growth finally starting to pick up. Additionally, the country maintained an ultra-low crime rate, superb infrastructure and transportation, and well-kept cities.

"DFJ" Japan-Focused ETF an Alternative to China 1

These positive signs are all feeding into strength for small cap equities in Japan.

Christopher Gannatti, WisdomTree Head of Research in Europe said, “We think Japanese small-caps provide the purest way to tap into the local economic growth prospects. After decades of deflation, deleveraging and demand contraction, Japan’s domestic demand is now driving growth. A structural shortage of labour is forcing improvements in both the quality of employment and the incomes earned from employment and the government are delivering on a policy switch to ‘Fiscal Dominance’ and Japanese small-caps have performed strongly across multiple time horizons in the past ten years, offering differentiation relative to large-caps alone.”

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