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Japan registered an economic expansion for eight quarters on the trot courtesy of strong consumer spending in the October-December 2017 period. Further, unemployment in the economy is near a four-decade low. Also, influx of money into the economy in the form of business and capital spending coupled with business-friendly economic and monetary policies has been pivotal in boosting Japan’s economic growth.

Under such favorable economic conditions, investing mutual funds that invest in Japan would make for a prudent decision.

Japanese Economy Grows For the Eight Straight Quarter

Japan’s GDP growth slowed in Q4, in line with the initial estimate. However, it grew for eight consecutive quarters, the longest streak of growth since a 12-quarter expansion ended in 1989 — the period of Japan’s economic bubble.

Japan’s economy grew at an annualized 0.5% in Q4 compared with 2.2% in the prior quarter. The rate of growth was below a median estimate of 0.9%, per Cabinet Office data. Bank of Japan’s easy money policies and Prime Minister Shinzo Abe’s stimulus measures are driving economic growth.

Factors Contributing to Such Growth

Accounting for two-thirds of GDP, private consumption grew 0.5% compared with a contraction of 0.6% in the previous quarter and surpassed expectations of a 0.4% increase. Moreover, capital expenditure rose 0.7% sequentially in the quarter compared with analyst expectations of a 1.1% increase. Capital expenditure grew for the fifth straight quarter, driving optimism on higher business investment. Finally, jobless rate in Japan fell to a 24-year low to 2.7% in November on the back on the highest number of job openings in as many as 40 years.

Moreover, exports advanced 9.3% in December after registering an increase of 16.2% in November, per the country’s Ministry of Finance. Exports rose for 13 straight months for the first time. Additionally, its manufacturers’ confidence climbed from 27 in December to 35 in January, reaching its best level in 11 years, per a Reuters Tankan poll. Strong rise in exports and robust manufacturer sentiment raised optimism for steady economic growth in the near future.

3 Best Mutual Funds to Buy Now

Given such positives, we have highlighted three Japan mutual funds poised to gain significantly from the country’s burgeoning economy and high consumer spending. These funds also carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three and one-year returns. Additionally, the minimum initial investment is within $5000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Fidelity Japan Smaller Companies (FJSCX - Free Report) seeks capital growth for the long run. It invests mainly in those small-cap companies that are economically based in Japan. These small-cap companies have market cap similar to those included on the JASDAQ Index or the Russell/Nomura Mid-Small Cap Index. FJSCX may also invest in large-cap companies.

This Sector - Japan - Equityproduct has a history of positive total returns for over 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

The Fidelity Japan Smaller Companies Fund, as of the last filing, allocates its assets in top two major groups; Foreign Stock and Intermediate Bond.

FJSCX has a Zacks Rank #1 and an annual expense ratio of 0.94%, which is below the category average of 1.26%. The fund has three and one-year returns of 16.8% and 26.8%, respectively.

ProFunds UltraJapan Fund Service Class (UJPSX - Free Report) seeks daily investment results that correspond, before fees and expenses, to 200% of the performance of the Nikkei 225 Stock Average. The fund provides leveraged exposure to the large-cap, Japan-based Nikkei 225 Stock Average.

This Sector - Japan - Equity product has a history of positive total returns for over 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

The ProFunds UltraJapan Fund, as of the last filing, allocates its assets in top two major groups; High Yield Bond and Foreign Stock.

UJPSX has a Zacks Rank #1 and three and one-year returns of 4% and 14.6%, respectively.

Rydex Japan 2x Strategy A (RYJSX - Free Report) seeks to provide investment results that correlate to the performance of the Nikkei 225 Stock Average. RYJSX invests the majority of its assets in securities of companies in the underlying index. It also invests in derivatives and other instruments whose performance is expected to correspond to that of the underlying index.

This Sector - Japan - Equityproduct has a history of positive total returns for over 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

The Rydex Japan 2x Strategy A Fund, as of the last filing, allocates its assets in top two major groups; Foreign Stock and Foreign Bond.

RYJSX has a Zacks Rank #2 and an annual expense ratio of 1.52%, which is below the category average of 2.01%. The fund has three and one-year returns of 16.6% and 28.9%, respectively.

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