Hedged Japan ETFs May Shine on Efforts to Weaken the Yen

NEW YORK (ETF Expert) -- Several months before Shinzo Abe took office as Japan's prime minister, the pre-ordained leader had expressed a fierce determination to jump start Japan's economy through unconventional monetary policy measures. Like the U.S. Federal Reserve, the Bank of Japan would electronically create yen to acquire less liquid assets, such as government bonds.

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For a six-month stretch (Nov. 16, 2012-May 15, 2013), Japanese stocks rocketed alongside speculative support for the yen creation trade. WisdomTree Hedged Japan (DXJ) and iShares MSCI Japan (EWJ) logged 67.5% and 41.2%, respectively. In spite of the remarkable run-up, however, Japanese equities flat-lined over the 15 months that followed.

DXJ Two Years 200-Day

Courtesy of StockCharts.com

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Naturally, if anyone were able promise you a 21-month or two-year return in the neighborhood of 65%, you would not care if it happened in a flash or in a gentle uptrend. Nevertheless, it is difficult to look at 18 months of futility as a sign that Japan's quantitative easing efforts are still creating a "wealth effect" that inspires longer-term confidence in "Abenomics."

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