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Can the Record Rally in Japan ETFs Continue?

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  • (1:15) - Japanese Stock Market Rally: The Psychological Effect
  • (8:05) - What Impact Did Corporate Governance And Foreign Investors Have On The Japanese Stock
  • Market Rally?
  • (15:15) - Will This Rally Continue and For How Long?
  • (18:00) - What Are The Current Risks for The Japanese Market?
  • (20:00) - WisdomTree Japanese ETF Suite: DXJ, DFJ, DXJS
  • (25:20) - Episode Roundup: EWJ & FLJP


In this episode of ETF Spotlight, I speak with Jeremy Schwartz, Global Chief Investment Officer at WisdomTree Asset Management, about investing in Japan, the best-performing major market globally in the first quarter. Last year, Japanese stocks posted their best annual gain in a decade.

The Japanese government has incentivized companies to improve corporate governance and use their capital efficiently, leading to significant improvements in dividends, share buybacks, and the unwinding of cross-shareholdings.

Last year, Warren Buffett's Berkshire Hathaway (BRK.B - Free Report) increased its stake in Japan's five largest trading houses. Buffett stated that he likes these stocks for their earnings yields and dividends.

Global money managers now view Japan as a much more attractive investment destination than China. Chinese individual investors are also piling into Japanese shares, having been burned by their domestic stocks and real estate investments.

The late Prime Minister Shinzo Abe launched an aggressive policy—popularly known as "Abenomics"—to put the country back on the growth path and end the deflationary spiral.

Last month, the Bank of Japan ended an era of negative interest rates and raised interest rates for the first time since 2007, signaling that the country has finally exited from decades of deflation.

The yen recently plunged to a new 34-year low against the dollar. The decline in the currency boosts sales and profits for Japanese exporters. Currency-hedged ETFs have significantly outperformed unhedged Japan funds as well as the S&P 500 index.

After many "lost decades," Japanese stocks remain attractively valued despite the recent surge, particularly compared to US stocks.

The government is spending billions to attract semiconductor giants like Taiwan Semiconductor Manufacturing (TSM - Free Report) as it tries to regain its status as a major semiconductor power amid rising tensions.

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

The iShares MSCI Japan ETF (EWJ - Free Report) is the most popular product in this category, while the Franklin FTSE Japan ETF (FLJP - Free Report) is the cheapest.

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