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Investing in Japan never looked so good

Suzanne O'Halloran

If you are not long Japanese stocks you should be. That’s the view of Jeremy Schwartz, Director of Research, at WisdomTree. “I think Japan, from a valuation perspective, is one of the most attractive developed markets,” one that’s being driven by earnings. “There is actually real growth in corporate profits.” he adds.

Last October, the Bank of Japan stunned global investors with an unprecedented $1.4 trillion stimulus package that Schwartz believes is paying off. “The yen has gone from 80 to 118 which is supporting the exporters like Toyota (TM) and all the other car companies.” Shares of Toyota have gained over 15% during the past three months.

Investors looking to capture the performance of Toyota, along with Nissan (NSANY) and Honda (HMC), can buy the WisdomTree Japan Hedged Equity ETF (DXJ) which counts these automakers, as well as Mitsubishi Financial (MTU) and Takeda Pharmaceuticals (TKPYY) as its large, dividend paying holdings.

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Schwartz believes steady continued support from the Bank of Japan will continue to fuel Japan’s economy and stock market. “They are aggressively buying bonds, they are buying real estate, they are buying ETFs to support their risk assets.” The BOJ's efforts are working well as the Federal Reserve moves in the opposite direction. As investors await a rate hike, the U.S. dollar (UUP) has continued to strengthen and in Schwartz's opinion, that's creating a win-win for Japanese companies.“Buy the stocks and the stocks that are benefiting from the weak yen which is the exporters.” The CurrencyShares Japanese Yen ETF (FXY) has declined 9% during the past three months.

 

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