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Japan Small-Cap ETFs May Outperform if Rally Continues


WisdomTree Japan Hedged Equity (DXJ) and iShares MSCI Japan (EWJ) have gotten a lot of press this week with the Nikkei topping 14,000 for the first time since 2008.

However, investors can also look at small-cap ETFs for Japan to capture any additional upside.

ETFs in this category include WisdomTree Japan SmallCap Dividend Fund (DFJ), SPDR Russell/Nomura Small Cap Japan ETF (JSC) and iShares MSCI Japan Small Cap ETF (SCJ).

DFJ is the largest in the group with assets of about $241 million. It charges an expense ratio of 0.58%.

JSC holds $96 million and levies fees of 0.55%, while SCJ is a $71 million fund with an expense ratio of 0.53%.

Investors can consider Japan small-cap ETF such as DFJ as an alternative with greater growth potential than large caps, according to consulting firm About Emerging Growth LLC.

“Over the long run, many studies have shown that small-cap stocks tend to outperform large-cap stocks during bullish economic cycles,” it said. “These same trends may come into play in Japan, where the economic recovery is even more pronounced.” [Japan ETFs Rocket as Nikkei Tops 14,000]

WisdomTree Japan SmallCap Dividend Fund