iShares MSCI Japan Value ETF

EWJV

Market cap $495M

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

Berkshire's higher stakes in Mitsubishi and Mitsui spark a rally in Japan's trading houses. ETFs like FJP, EWJV, DFJ, SCJ, FLJH are likely to benefit.

iShares MSCI Japan Value ETF's sector selection, with heavy financials and export-oriented industries, increases vulnerability to yen weakness and U.S. tariffs. Upcoming Japanese elections and potential stimulus could further weaken the yen, linked also to raising rates hurting equities. A weaker yen could be worsened by a reignited carry trade, and financials have the most to lose here with little foreign FX inflows as a hedge.

Bessent's meeting with Japanese officials signals potential strategic moves related to US-JPY Forex matters. The Yen's year-to-date strengthening enhances currency return benefits, making Yen-denominated investments more attractive. EWJV is the value orientated version of iShares EWJ with a higher dividend yield.

US markets are at all-time highs, prompting me to seek undervalued opportunities, leading me to take a mental trip to Japan. My previous Japanese investments have yielded great returns as the Nikkei rose. Now, I'm analyzing the iShares MSCI Japan Value ETF to see if it still holds any value. As EWJV holds mostly financial and automobile companies, the current valuation doesn't look attractive.

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.

Japan's equities gained traction due to Warren Buffett's interest and regulatory actions aimed at improving investor sentiment, with notable companies like Mitsubishi UFJ Financial Group seeing price increases. BlackRock's iShares MSCI Japan Value ETF targets large- and mid-cap Japanese equities with value characteristics, but its performance hasn't outpaced the broader Japanese market. Japan's long-term economic challenges include deflation and demographic issues, but companies like Toyota and Honda maintain strong global presence and profitability.

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 “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.

EWJV provides low-cost access to 134 large and mid-cap Japanese stocks with value characteristics. Despite outperforming developed markets by over 2x during the past year, EWJV's valuations still look reasonable. The growth landscape does not look too alluring in Japan.