The International Monetary Fund raised its forecast for Japan’s economic growth in 2020 to 0.7% from the projection of 0.5% announced last October. The rise in estimates has been supported by the launch of the first fiscal stimulus package since 2016 by Prime Minister Shinzo Abe. Per FocusEconomics, about 20% of the $120-billion fiscal stimulus package will be used from December 2019 to March 2020 and the remaining from April 2020 to March 2021 (read: IMF Cuts Global Growth Outlook: 5 ETF Areas to Bet On).
Japan’s Economic Scenario
Japan’s economy delivered better-than-expected growth in third-quarter 2019 buoyed by improved fixed investment levels. Also, the government of Japan raised the consumption tax to 10% from 8% on Oct 1, 2019. It has also taken precautionary measures to safeguard the economy from any adverse effect of the move. In a bid to promote cashless transactions, the government has provided a 5% rebate on purchases made using credit cards or electronic payment methods.
IMF has also raised its forecast for economic growth in 2019 by 0.1 percentage point to 1%. Strength in business investment and better-than-expected consumer spending are driving the upbeat forecasts. Several government initiatives, including shopping rebates to avoid any slowdown due to the October sales tax hike, are supporting the upside.
Furthermore, the signing of the Sino-US phase one trade deal is expected to alleviate trade tensions that were affecting Japan’s export levels for long. Also, Japan’s economy is expected to get support from low unemployment levels, 2020 Olympics and Paralympics and a very low interest rate level.
ETFs to Gain
Against this backdrop, investors can keep a tab on a few Japan ETFs like iShares MSCI Japan ETF EWJ, JPMorgan (NYSE:JPM) BetaBuilders Japan ETF BBJP, WisdomTree Japan SmallCap Dividend Fund DFJ, Franklin FTSE Japan ETF FLJP and iShares MSCI Japan Small-Cap ETF SCJ.
EWJ
This fund tracks the investment returns of the MSCI Japan Index. It comprises 323 holdings. The fund’s AUM is $13.93 billion and the expense ratio, 0.49%. The fund has returned 12.9 % in the past year (read: Country ETFs to Top/Flop on US Air Raid at Baghdad).
BBJP
This fund tracks the investment returns of the Morningstar Japan Target (NYSE:TGT) Market Exposure Index. It comprises 375 holdings. The fund’s AUM is $4.45 billion while the expense ratio stands at 0.19%. The fund has returned 12.6% in the past year (read: Japan ETFs in Spotlight as Economy Beats Growth Estimates).
DFJ
This fund tracks the investment returns of the WisdomTree Japan SmallCap Dividend Index. It consists of 740 holdings. The fund’s AUM is $405.5 million and the expense ratio is 0.58%. The fund has gained 9.5% in the past year.
FLJP
The fund tracks the performance of the FTSE Japan Capped Index. It comprises 502 holdings. The fund’s AUM is $378.7 million and the expense ratio, 0.09%. The fund has gained 11.3% in the past year.
SCJ
The fund provides exposure to small public companies in Japan and tracks the MSCI Japan Small Cap Index. It comprises 972 holdings. The fund’s AUM is $96 million and the expense ratio, 0.49%. The fund has gained 8.5% in the past year.
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iShares MSCI Japan ETF (EWJ): ETF Research Reports
WisdomTree Japan SmallCap Dividend Fund (DFJ): ETF Research Reports
iShares MSCI Japan Small-Cap ETF (SCJ): ETF Research Reports
Franklin FTSE Japan ETF (FLJP): ETF Research Reports
JPMorgan BetaBuilders Japan ETF (BBJP): ETF Research Reports
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Zacks Investment Research