The WisdomTree Japan Hedged Equity Fund (DXJ ), one of the oldest and largest Japan ETFs, is up nearly 21% YTD. Alone, that’s an impressive feat. It’s even more so when considering DXJ is a currency -hedged ETF and the dollar is mired in a 2025 slump.
DXJ’s fortitude against the weak dollar backdrop is doubly important. First, because the ETF is displaying clear resilience. Second, that temerity positions the fund to benefit from the ascent of Sanae Takaichi as prime minister of Japan. She’s the country’s first female prime minister. That’s an important historical footnote. But what’s relevant to near-term investors, including those pondering stakes in DXJ, are expectations she will continue the pro-market reforms of her predecessors.
DXJ is higher by 2.42% for the week ending October 21. So it appears investors are comfortable wagering on Takaichi extending the reforms of her predecessors with fiscal support at the centerpiece of her national economic agenda.
Takaichi Could Be Boon for DXJ
The pricing in of a Takaichi victory by Japan stocks and ETFs like DXJ is a sign investors are comfortable, maybe optimistic, with her plans for Japan’s economy.
“Markets see in Takaichi a leader who intends to keep Japan’s economy moving forward through targeted public investment,” noted Nigel Green, CEO of deVere Group. “There are indications that fiscal expansion will remain at the heart of policy, particularly in sectors viewed as vital to national resilience – defence, technology, energy, and cybersecurity.”
As Green’s comments related to the $4.3 billion DXJ, expectations that the new prime minister will prioritize national security spending is pertinent. That’s because the ETF allocates 25.63% of its weight to industrial stocks, its largest sector exposure. Cybersecurity and broader tech initiatives are also important to prospective DXJ investors. That’s because tech stocks account for nearly 11% of the ETF’s portfolio.
Green noted global investors have already been embracing Japan’s equities. Perhaps that’s another endorsement of the Takaichi platform. It might also be a sign American market participants mulling DXJ may not want to delay their involvement.
Fresh Impetus for Rally
“Now, the country’s political stability and renewed fiscal ambition are giving that rally fresh impetus,” concluded the deVere CEO. “Takaichi’s proposed alignment of government spending with structural reform is viewed by markets as a potential turning point for Japan’s economic model. Her coalition has pledged to streamline bureaucracy and direct spending toward long-term strategic goals.”
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