Japan: Weekly ETF and CEF Performance

Japanese ETFs trading in the U.S. struggled last week with none posting gains and two of ten ending flat. The Nikkei revisited 18,000 during the week, but failed to hold it after a sell-off Friday.

On Monday (6/11), the Nikkei recouped only 0.5% of Friday's 1.5% drop.

The Nikkei could retest 18,000, since it's only about 1% off, but it will be mixed trading through the Bank of Japan's rate decision meeting Thursday.

At 17,834.48 as of Monday's (6/11) close, the Nikkei 225 is still about 2.5% under its 52-week and multi-year high of 18,300.39 (intra-day; it closed at 18,215.35) set on Feb. 26. (See chart below: 6/11)

The 10 Japanese ETFs (including 2 CEFs) trading in the U.S. lost a combined average 0.6% last week, but remain positive on the year, up 1.0%.

Here's their combined average return over the past two months:

05/25 - 06/01: +2.9%
05/18 - 05/25: +0.3%
05/11 - 05/18: -3.4%
05/04 - 05/11: +0.4%
04/27 - 05/04: +0.8%
04/20 - 04/27: -1.7%
04/13 - 04/20: +0.6%
04/05 - 04/13: -0.9%

See the chart below for more details of last week's and ytd returns.

Click to enlarge chart

Disclosure: The author does not own shares of any funds mentioned in this article.

The Japan Equity Fund (JEQ), one of two closed-end Japan funds, led all decliners, -1.8%, but remains in positive territory for the year at +1.8%. The Japan Smaller Cap Fund (JOF) [closed-end] lost 1.5%, falling to a double-digit year-to-date loss again at -10.1%.

Vanguard's Pacific Stock ETF (VPL) lost 0.1%, but continues to lead all Japan ETFs ytd (+6.7%).

iShares MSCI Japan Index (EWJ), the most actively traded country-based ETF, also lost 0.1% and is up 3.2% for the year.

As reported in recent weeks, yen weakness persists against both the euro and US$. I don't expect the yen carry trade to unwind, even with a BoJ rate hike as early as August, as some are now forecasting based on the Jan. - Mar. GDP revision to 3.3%, among other economic data. A quarter-point hike to 0.75% still leaves a significant spread.

See the chart below of the CurrencyShares Japanese Yen Trust (FXY) ETF, which was launched earlier this year.

For your reference, here's a list of the 10 funds surveyed in this weekly summary, including Monday's (6/11) close and % change:

iShares MSCI Japan Index (EWJ) -0.14% to $14.64
iShares S&P/TOPIX 150 (ITF) -0.08% to $129.41
Japan Equity Fund, Inc. (JEQ) -0.70% to $8.55
Japan Smaller Capitalization Fund, Inc. (JOF) -0.52% to $11.51
SPDR Russell/Nomura Prime Japan (JPP) +0.05% to $57.12
SPDR Russell/Nomura SmallCap Japan (JSC) -0.49% to $50.65
Vanguard Pacific Stock (VPL) -0.18% to $70.77
WisdomTree JP High-Yielding Equity (DNL) -0.16% to $57.96
WisdomTree JP SmallCap Dividend (DFJ) -0.64% to $51.38
WisdomTree JP Total Dividend (DXJ) +0.23% to $56.21