An ETF is a marketable security that tracks a stock index, commodities, bonds or assets. While ETFs may be similar in so many ways, they differ from mutual funds since shares traded like common stock on an exchange. The prices of ETFs also differ throughout the day as they are sold or bought.
Some ETFs are established as Unit Investment Trusts (UITs) which have dates set in the future indicating when the fund will end. Some ETFs may have heavy concentration in just one stock asset while others may have a small group of stocks and assets that are very highly correlated.
The Japan Exchange-Traded Funds (EFTs) invests most of its assets in Japanese equities that trade on local stock exchanges. ETFs in the Japanese stock market track seven indices. Japan ETFs are managed passively around a broad underlying index, an example is the MSCI Japan Index which represents over 75% of the total market cap of all equities listed in Japan.
Advantages of Japan ETFs
The Japan equity ETFs have gone from hot to cold in the past few years. These are some of the reasons why you could consider investing in a Japan ETF;
- The global economic recovery led to improved corporate earnings in Japan especially in areas of trade, electronics and machinery.
- Japan’s stocks have cheaper valuations compared to not just the American ones but they’re also very low compared to the rest of the world.
- Investors have so much faith in Japan ETFs such as; iShares MSCI Japan, Wisdom Tree Japan SmallCap Dividend ETF, iShares Currency Hedged MSCI Japan, Deutsche X-Trackers MSCI Japan Hedged Equity and the Wisdom Tree Japan Hedged Equity.
- Another advantage of Japan ETFs is the fact that most Japanese companies are rich in cash. This reason makes Japanese equities offer great quality exposure.
Latest News on Japan’s ETFs
In recent news, it was mentioned that Japan’s Financial Services Agency is considering approving one or more Bitcoin ETFs. This is however not the fact as Japan doesn’t see the need for a Bitcoin ETF an FSA representative spoke to Bitcoin.com stating that;
“There is no such fact that we are considering approving ETFs which track crypto-assets at present. We are not currently considering approving them.’’