BOJ Stimulus Plan Hurts Yen-Focused ETFs

ETF.com

Currency exchange-traded products focused on the yen were feeling the weight Thursday of Japan’s announcement that it will buy 7.5 trillion yen worth of government bonds a month and double its monetary base in the next two years in an effort to revive the long-stagnant economy and reach an inflation target of 2 percent.

The Bank of Japan’s announcement—the first tangible measure in an ambitious quantitative easing plan Prime Minister Shinzo Abe has been alluding to since he was elected last fall—was far more aggressive than many had expected, and led Japanese equities to rise to 4 ½-year highs while the yen posted its steepest decline in several months.

The CurrencyShares Japanese Yen Trust (FXY), a fund tracking the price of the Japanese yen that was launched in 2007, was down nearly 3 percent in early trade, nearing 52-week lows as it approached a 10 percent loss year-to-date.

Having traded as high as $126.48 a share as recently as last September, FXY is now hovering around the $102-a-share mark, facing losses that are closing in on 20 percent in just six months. Still, investors have continued to pour assets into the fund—to the tune of $35.5 million net inflows so far this year—pushing FXY’s total assets to near the $150 million mark.

Another strategy in the space is the iPath JPY/USD Exchange Rate ETN (JYN), a Barclays Capital note that tracks the yen/dollar exchange rate net of fees. JYN remains in the red, with year-to-date losses of 11 percent, and net outflows of $3.18 million in the same period. The fund now has under $2 million in total assets.

Equities Rocketing Upward

On the flip side, Japanese equities ETFs are shining, with funds like the $7.1 billion iShares MSCI Japan Index Fund (EWJ) climbing some 4.2 percent in early trade after gapping higher at the opening to reach its highest mark since February 2011. The fund has seen gains of some 12 percent so far this year.

EWJ, however, doesn’t hedge the exposure to the declining yen, something the WisdomTree Japan Hedged Equity ETF (DXJ) does, and its performance shows.

Early Thursday, DXJ was trading 7.5 percent higher, at its highest level since September 2008, extending what’s now a nearly 20 percent gain year-to-date. The fund continues to outpace its competitors in terms of asset gathering, having now attracted $3.95 billion since the beginning of the year. EWJ has seen net inflows of $1.61 billion in the same period.

The db X-trackers MSCI Japan Hedged Equity ETF (DBJP)—a fund that tracks the same benchmark anchoring EWJ but that hedges the currency exposure—was also trading some 6.75 percent higher Thursday, having risen now 22 percent since Jan. 1.


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