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The U.S. has involved itself in the latest flare up of the islands dispute between Japan and China in the East China Sea by flying two unarmed B-52 bombers in the area without informing Beijing.
The U.S. moves comes after China included the islands - known as Senkaku in Japan and Diaoyu in China - in an Air Defense Identification Zone, and warned that it would take military action against airplanes flying in the region without notification.
Meanwhile, Japanese airlines have also defied Beijing and flown through the area without providing China with flight plans.
At stake in the row are fishing rights and access to up to 160B barrels of oil.
When the dispute first flared up a year ago, trade between China and Japan was badly hit, with the latter's car makers suffering in particular.
Some members of the Bank of Japan's board believe it will be "difficult" for the BOJ to achieve its 2% inflation goal within two years, as pledged in April.
The minutes of the last meeting in October show that three out of nine policy makers voted against a statement which said that the bank expects inflation to hit 1.9% in FY 2015. That's up from two votes at the previous meeting.
One member believes that the rise in CPI "had already peaked, as the effects of the rapid depreciation of the yen had dissipated." There's also concern about the risks to Japan's economic outlook.
The skepticism contrasts with the optimism of BOJ Governor Haruhiko Kuroda, who just yesterday expressed confidence that the bank will meet its inflation goal, although he did acknowledge that the target is "very ambitious."
The USD-JPY is -0.2% at ¥101.46 and the Nikkei is -0.7%.
Japanese exports rose at their fastest pace in three years, jumping 18.6% on year in October vs 11.5% in September and beating consensus of 16.5%.
Exports also rose 4.4% in volume terms, suggesting that Japan is not just relying on the weak yen to boost trade. Car shipments were particularly strong, surging 31.3% in yen terms and 7.5% in in volume terms.
Imports jumped 26.1% vs +16.5% and +19%, again driven higher by soaring fuel costs.
The trade deficit rose to ¥1.09T ($11B) from ¥932.1B and was above forecasts for ¥813.5B.
The Nikkei is -0.3%, while the USD-JPY is flat at ¥100.13. (PR)
It's worth paying another 50 or 60 basis points in expenses for a good ETF product not tracking a vanilla index, says RiverFront Investment's Rod Smyth at a Barron's ETF roundtable. One favorite in emerging markets is PowerShares' FTSE RAFI Emerging Markets Portfolio (PXH) which tilts towards factors like book value and cash flow and offers bigger weighting to sectors like energy. Bullish on Japan, his pick is WisdomTree's Japan SmallCap Dividend Fund (DFJ). Another favorite is PowerShares' FTSE RAFI Developed Markets Ex-U.S. Portfolio (PXF).
The Nikkei continues a big rally this week, up 2.1% overnight and now higher by about 6% this week. Boosting the action last night was Finance Minister Tara Aso saying the government still has the option of intervening in currency markets. This had the yen (FXY) falling further and allowed dollar/yen to bust through ¥100 for the first time since about Labor Day.
"The view that tapering of stimulus won’t happen for a while is spreading,” says one fund manager. Taper? Japan? Yikes.
Separately, Nomura's Norikazu Akedo says the government must continue to feed the monkey or the Nikkei could fall 20%. “Worldwide investors are breathlessly watching the future of Japan,” he says. “We want the government to send out strong messages to foreign and local investors.”
As expected, the Policy Board of the Bank of Japan has maintained its program of expanding the monetary base at an annual rate of ¥60-70T ($611-713B) a year. (PR)
The BOJ said it is making steady progress in achieving its target of 2% inflation, and reiterated that it expects CPI of 1.3% in 2014-15 and 1.9% a year later.
The central bank slightly increased its 2014-15 GDP growth outlook to 1.5% from a prior prediction of 1.3% but maintained its 2015-16 forecast at 1.5%.
The BOJ warned that "overseas economies are performing somewhat weaker than projected" in its April semi-annual report. However, the bank expects those economies "to gradually pick up," mainly in advanced areas.
The Nikkei is -1.2% and the USD-yen is -0.2% at ¥98.32. (PR)
Japanese industrial output rose 1.5% on month in September after dropping 0.9% in August but missed consensus of +1.8%.
On year, production jumped 5.4% after falling 0.4%.
Japan's trade ministry forecast that output would increase 4.7% on month in October and then drop 1.2% in November.
"Production is on a positive trend because of domestic consumer demand, but this could plunge after the (sales) tax hike next year," said JPMorgan economist Masamichi Adachi. "Exports are the biggest risk to output now due to slowing global demand."
The Nikkei is +1.3% and the yen is flat at ¥98.20 to the dollar. (PR)