Tying It All Together
As expected, EWJ outperformed DXJ over the past year during a period when the yen gained roughly 8 percent against the dollar. And just as a reminder, the new Nikkei 225 fund will also be nonhedged and priced in dollars, so it should also benefit from a strengthening in the yen.
However, if the G7 intervention leads to a reversal in the strong yen trend and fuels a recovery in Japanese equities, the upside for returns in nonhedged funds like EWJ and the new Nikkei fund could be muted from a weakening yen.
So, while EWJ and the new Nikkei fund may be the play for investors bullish on the yen, those who expect a reversal in the yen's strength and who are bearish on the Japanese currency might consider DXJ to be the better play.
|Fund Name||iShares MSCI Japan Fund||WisdomTree Japan Hedged Equity Fund||MAXIS Nikkei 225 Index Fund|
|Index||MSCI Japan Index||WisdomTree Japan Hedged Equity Index||Nikkei 225 Index|
|Number of Holdings||323||318||225***|
|Top 5 Holdings||Toyota (5), Honda (2.7), Mitsubishi UFJ (2.6), Canon (2.3), Sumitomo Mitsui (1.7)||NTT DoCoMo (3.8), NTT (3.2), Toyota (3), Mitsubishi UFJ (3), Canon (2.8)||Nikkei 225 Index Replication**|
|Weighting Scheme||Market Cap Weighted||Fundamentally Weighted||Price Weighted|
Data as of 7/5/2011
*Prior to April 1, 2010, DXJ was named the WisdomTree Japan Total Dividend Fund.
**NKY is still in filing with the Securities and Exchange Commission, and all information is according to the N-1 filing.
***According to the N-1, the fund will replicate the Nikkei index, except where replication is not possible or practical.
Disclosure: I am currently long DXJ.