Xtrackers MSCI Japan Hedged Equity ETF

DBJP

Market cap $425M

Nikkei closes at 51,063, extending gains for a second session. Manufacturing confidence hits a four-year high as exports strengthen.

Japan stocks are rallying on the BoJ's dovish stance & Takaichi's pro-growth push. Play the trend via ETFs DXJ, DBJP, HEWJ, and YCS.

Solid growth and ongoing shareholder-friendly reforms are driving Japanese equity gains, keeping us overweight. We see the AI theme playing out globally.

Among APAC equity markets, Australia has a higher beta to oil prices while India, Indonesia and Thailand have lower betas. Domestic political uncertainties have been one main reason for the decoupling trend seen in Indonesia and Thailand.

As the global private equity industry took tentative steps toward recovery in 2024, Japan raced ahead. The value of private equity investment in Japan jumped nearly 41% over the prior-year total in 2024, far outpacing the 25% year-over-year gain in global private equity deal value, according to S&P Global Market Intelligence data.

Today's data were a mixed bag, but the Bank of Japan will pay more attention to the sharp rise in Tokyo's inflation. Tokyo consumer prices rose more than expected to 2.6% YoY (vs 2.2% in July, 2.3% market consensus).

The Yen hedge has not been in holders' favor lately as the currency has rallied. Importantly, the Japanese indices themselves are negatively correlated to the Yen as large cap stocks have large foreign markets, with automotive as an example. The generally export-led economy doesn't benefit massively from a stronger Yen, although domestically it might as the Yen declines have become quite extreme.

The “real” policy rate is massively negative, with the new policy rate of 0.25% far below Core CPI of 2.6%. When QT reaches about ¥3 trillion per month in 2026, it would represent a reduction of its JGB holdings of about 0.5% per month.

Japan has been struggling for some time to generate enough velocity in inflation to escape the gravitational pull of deflation. The story for the rest of 2024 and into 2025 is now centered on whether inflation will be sustained at the BOJ's 2% target.

In March, the Bank of Japan abolished its 8-year-old negative interest rate policy, hiking rates for the first time in 17 years by raising its benchmark rate to 0-0.1%. To combat inflation while also avoiding an excessive surge in interest payments, the BOJ is considering passive quantitative tightening.