NEW YORK (TheStreet) -- ETF investors have a slew of options when it comes to Japan and ex-Japan exposure, but the island's tepid performance in the past year hasn't attracted that many investors, meaning several ETFs, including most leveraged ETFs, have very low volume.

However, Japan may be of more interest in the future. It was reported last week that the Japanese economy grew at an annualized pace of 4.9% in the first quarter of this year.

The growth of Japan's economy is promising as demand for its exports is becoming more diversified. Last year, China overtook the United States as the number one destination for Japanese goods shipped abroad.

There are also signs that Japan's domestic economy is picking up as household spending increased at an annualized rate of 1.3% in the first quarter of this year.

For exposure to the Japanese economy, the most heavily traded ETF that provides investors with access is

iShares MSCI Japan Index

(EWJ)

.

EWJ is filled with large-cap Japanese companies and its top ten holdings feature familiar names such as

Toyota

(TM)

,

Sony

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and

Canon

(CAJ)

. The ETF has more than 325 holdings, meaning that a lack of diversity among companies is not a concern with this fund.

From a sectoral standpoint, EWJ is also well distributed. The four sectors with the largest distribution of net assets from largest to smallest are consumer discretionary, industrials, financials and information technology.

For investors who want to take a small-cap approach to Japan, the most liquid option is

WisdomTree Japan Small Cap Dividend

(DFJ)

. There are two other options for small-cap exposure in

SPDR Russell/Nomura Small Cap Japan

(JSC)

and

iShares MSCI Japan Small Cap Index Fund

(SCJ)

, but their low trading volumes raise liquidity concerns.

In the large-cap spectrum of funds, there are many alternatives to EWJ but most of them trade with low volume.

One that trades with a fair amount of volume and offers investors a unique approach to the Japanese markets is

WisdomTree Japan Hedged Equity

(DXJ)

.

Unlike EWJ, DXJ gives investors the ability to gain exposure to Japanese markets while hedging their investment against currency fluctuations.

Foreign equity ETFs such as EWJ that do not hedge against currency movements will change in value based on the share movements of their holdings plus the change in the value of the country's currency against the U.S. dollar. For instance, if the yen increases in value against the dollar by 5% in a month, EWJ will increase by 5%, plus or minus the performance of its underlying holdings.

With DXJ, currency fluctuations are not a direct factor for investors when deciding whether or not to bet on the Japanese markets. By adding currency forwards that rise when the yen falls, the fund is able to neutralize currency effects. In essence, DXJ allows foreign investors to think like a domestic Japanese investor and decide whether they are bullish or bearish on Japanese equities, regardless of the currency.

Although not entirely identical to EWJ in terms of holdings, DXJ also has a large-cap focus and features similar holdings and sectoral weightings. This makes DXJ a good option for investors who want exposure to Japan, but expect the yen to decline in value vs. the dollar. Surprisingly, this hedged ETF is offered at a discount to the unhedged Japan ETF, EWJ. DXJ has an expense ratio of 0.48% vs. the 0.56% charge for EWJ.

Investors who want to bet exclusively on the exchange rate between the yen and the dollar have the option of using the currency ETF

CurrencyShares Japanese Yen Trust

(FXY)

. Shares of FXY increase in value when the yen strengthens against the U.S. dollar.

For investors bearish on the yen, there is a leveraged ETF with significant volume:

ProShares UltraShort Yen

(YCS)

.

For investors who are bearish on Japan's markets altogether, the short ETF,

ProShares UltraShort MSCI Japan

(EWV)

, does not have enough volume, but Asia ex-Japan economic sphere can be found by using an ETF such as

iShares MSCI Pacific ex-Japan Index Fund

(EPP)

or

iShares MSCI All Country Asia ex Japan Index Fund

(AAXJ)

.

Both trade with ample volume and EPP provides investors with Japan-free exposure to mainly Australia, Hong Kong and Singapore. On the other hand, AAXJ looks further into Asia and includes exposure to China, South Korea, Taiwan and India, while also excluding holdings from Japan.

At the time of publication, Dion Money Management owed EWJ.

Don Dion is president and founder of

Dion Money Management

, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.