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Japan ETFs to Shine as IMF Lifts Economic Outlook for 2020

Sweta Jaiswal, FRM

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 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 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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Click to get this free report 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 To read this article on Zacks.com click here. Zacks Investment Research Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report