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Why Currency Hedged Japan ETFs are Beating the S&P 500

Global central banks have been raising rates aggressively this year as they try to tame multi-decade high inflation. The Bank of Japan, on the other hand, continues its ultra-loose monetary policy since inflation remains close to 3% in Japan, just slightly above the central bank’s target.

This year the US dollar has surged more than 30% against the Japanese yen, which is close to its 32-year low now. The decline in currency boosts sales and profits for Japanese exporters. Further, many Japanese companies have very strong balance sheets now after years of Abenomics.

It may be a good time for investors to look at Japanese stocks but given the strength in the dollar, currency-hedged ETFs are a safer option for US investors. They have significantly outperformed the unhedged Japan funds as well as the S&P 500 index.

The WisdomTree Japan Hedged Equity Fund DXJ holds dividend paying exporters. Well-known companies like Toyota Motor TM and Mitsubishi UFJ Financial Group MUFG are its top holdings.

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The iShares Currency Hedged MSCI Japan ETF HEWJ is the currency-hedged version of the iShares MSCI Japan ETF EWJ. The WisdomTree Japan Hedged SmallCap Equity Fund DXJS tracks a dividend-weighted index of Japanese small-cap stocks.

To learn more about these ETFs, please watch the short video above.


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Toyota Motor Corporation (TM) : Free Stock Analysis Report
 
iShares MSCI Japan ETF (EWJ): ETF Research Reports
 
WisdomTree Japan Hedged Equity ETF (DXJ): ETF Research Reports
 
iShares Currency Hedged MSCI Japan ETF (HEWJ): ETF Research Reports
 
WisdomTree Japan Hedged SmallCap Equity ETF (DXJS): ETF Research Reports
 
Mitsubishi UFJ Financial Group, Inc. (MUFG) : Free Stock Analysis Report
 
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Zacks Investment Research