iShares MSCI Japan ETF

EWJ

Market cap $20B

The tenuous ceasefire in Iran has the S&P 500 roaring back to life, reversing a month-long decline that put consumers and investors on edge. But the jump in U.S. stocks might have hidden the true beneficiaries: international stocks dependent on energy imports to sustain their economies.

Throughout 2025, the Vanguard S&P 500 ETF ( NYSE: VOO ) has performed well over the past 12 months at +29%, but Q1 2026 has been a struggle: at the time of this writing, it is -3.54% , year-to-date.

A key gauge of business sentiment in Japan improved for a fourth straight quarter.

Bargain stocks are in areas of U.S.-Japan synergy. Industrial conglomerate Hitachi has a joint venture with General Electric, for instance.

Japan's consumer prices rose at a slower pace in February, potentially affording the central bank more time to consider raising rates further amid heightened geopolitical risks.

The consumer price index fell to 1.3% last month, its lowest level since March 2022 and below the central bank's 2% target. It was down from 1.5% in January.

Japan's equity market, represented by EWJ, faces headwinds from energy shocks, a weak yen, and limited fiscal space despite recent investor enthusiasm. EWJ's sector exposure is vulnerable, with heavy weights in industrials and financials, while more resilient sectors have minimal representation. Valuation for EWJ at ~19x P/E is not excessive versus global peers but is above its own 10-year average and reflects sector mix differences.

The Bank of Japan kept its rates steady at 0.75% as expected, but noted that inflation risks now are tilted to the upside due to the Iran war.

Japan's prime minister in a tough spot going into her meeting with President Donald Trump, Desmond Lachman writes in a guest commentary.

I view the iShares MSCI Japan ETF as a buy after its recent 8% drop, driven by fears of Middle Eastern oil disruptions. Japan's strategic oil reserves, among the largest in the developed world, provide a critical buffer for several months against supply shocks. Short-term pain in gasoline and petrochemical prices is likely, but I expect a rapid rebound in EWJ once oil flows resume.