Specialized Japan ETF Doubles In Size As Yen Weakens

Includes: DBJP, DXJ, EWJ, FXY
by: Tom Lydon

After Japanese Prime Minister Shinzo Abe pledged to pressure the Bank of Japan into an unlimited monetary easing policy, investors are positioning for a weaker yen and higher Japanese stocks. Consequently, one Japan exchange traded has doubled its assets in under a month.

The WisdomTree Japan Hedged Equity Fund (NYSEARCA:DXJ), an ETF that hedges against depreciation in the Japanese yen and tilts toward export companies, now has over $2 billion in assets. DXJ is up more than 20% the past three months.

"Newly elected Prime Minister Shinzo Abe has been very effective through his plans and aggressive rhetoric to weaken the yen, and as a result, there has already been improved market sentiment in the world's third largest economy," Jeremy Schwartz, WisdomTree Director of Research, said in a press release.

Alternatively, investors can also take a look at the db-X MSCI Japan Currency-Hedged Equity ETF (NYSEARCA:DBJP), which provides exposure to the MSCI Japan Index while mitigating changes in changes in the exchange rate. It has also risen over 20% the last three months.

In comparison, the iShares MSCI Japan (NYSEARCA:EWJ), which tracks the MSCI Japan Index and does not hedge against currency fluctuations, is up about 9% the past three months.

The CurrencyShares Japanese Yen Trust (NYSEARCA:FXY) fell to a new multi-year low on Friday after Vice Finance Minister Takehiko Nakao announced Japan "will take appropriate action if necessary" after gains in the yen, according to the Dow Jones Newswires.

The yen's recent slide "should be regarded as a correction from the one-sided and excessive appreciation that took place up to last year," Nakao said, according to a MarketWatch report.

Liberal Democratic Party's Yasutoshi Nishimura believes that a yen at 100 to the dollar would not be a problem, Bloomberg reports.

The Bank of Japan adopted a 2% inflation target last week, reports Mitsuru Obe for The Wall Street Journal.

"It shouldn't be criticized even if a monetary policy -- which aims at ensuring growth and price stability of any country -- has a certain impact on exchange rates as a consequence," Nakao added in response to growing international criticism of fueling a global currency war.

WisdomTree Japan Hedged Equity Fund

Max Chen contributed to this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds; Guggenheim Investments; Guggenheim Specialized Products, LLC or any of their affiliates.