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 Quick QuoteDXJ - Free Report) holds dividend paying exporters. Well-known companies like Toyota Motor (TM Quick QuoteTM - Free Report) and Mitsubishi UFJ Financial Group (MUFG Quick QuoteMUFG - Free Report) are its top holdings.

The iShares Currency Hedged MSCI Japan ETF (HEWJ Quick QuoteHEWJ - Free Report) is the currency-hedged version of the iShares MSCI Japan ETF (EWJ Quick QuoteEWJ - Free Report) . The WisdomTree Japan Hedged SmallCap Equity Fund (DXJS Quick QuoteDXJS - Free Report) tracks a dividend-weighted index of Japanese small-cap stocks.

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