Japanese Prime Minister Sanae Takaichi is rolling out an ambitious post-election agenda aimed at supporting the world’s fourth-largest economy. The items on her “to do” list could have profound investment implications, potentially spotlighting opportunities with various ETFs. The Takaichi agenda could benefit legacy Japan ETFs.
These include the WisdomTree Japan Hedged Equity Fund (DXJ ). But it could open the door to opportunity with tactical approaches. And those include the WisdomTree Asia Defense Fund (WDAF) and the WisdomTree Japan Opportunities Fund (OPPJ ).
OPPJ follows the WisdomTree Japan Opportunities Index. That gauge aims to capture Japan’s shareholder yield opportunity set. That methodology implies the ETF is highly relevant at a time when Japan companies are increasing embracing shareholder rewards. That’s an effort Takaichi is supportive of and wants to extend.
“This broader set of Japanese companies are buying back stock, raising dividends and aligning compensation with shareholder value,” noted WisdomTree. “This is not a cultural aspiration anymore. It’s happening. Shareholder payouts in Japan have quadrupled over the past decade, with buybacks alone now eclipsing the total dividends of just 10 years ago.”
Another point of intrigue with OPPJ is that the ETF features significant allocations to Japan’s trading houses in which Warren Buffett’s Berkshire Hathaway is among the largest investors. Interestingly, OPPJ’s weights to those stocks exceed Berkshire’s.
“With roughly 45% of its weight in the ‘Buffett basket’ comprising his original investment in five Japanese trading houses, OPPJ gives investors access to the same exposure at a greater scale,” added WisdomTree.
Takaichi Prioritizing Defense Spending
The aforementioned WDAF debuted about a month ago. But the rookie ETF could immediately be relevant because Japan’s new prime minister is prioritizing increased defense expenditures.
“Takaichi is likely to increase Japan’s defense commitment, reinforcing air and maritime capacity and deepening integration with allied architectures,” according to WisdomTree.
Japan is the third-largest country exposure in WDAF. This new ETF could be the beneficiary of added relevance at a time when several of Asia’s largest ex-China economies are boosting defense spending, stealing a page from Europe’s playbook. Count India and South Korea — WDAF’s two largest geographic weighs — among the Asian nations joining in Japan in driving defense spending to the upside.
The Alliance's Workshop
“South Korea has become the alliance’s workshop, exporting artillery systems bundled with logistics, sustainment and local manufacturing,” concluded WisdomTree. “India is turning procurement calendars into production lines, with HAL, Bharat Electronics and BDL reshaping its aerospace and missile ecosystems.”
This article was prepared as part of WisdomTree’s general paid sponsorship of VettaFi | ETF Trends. This specific content within and any opinions expressed therein belong solely to VettaFi and do not reflect the opinion or analysis of WisdomTree, its employees, or its affiliates. Content published on VettaFi | ETF Trends is provided for educational purposes only and should not be considered investment or tax advice. For investment or tax advice, please consult a financial professional.
WisdomTree is an independent company, unaffiliated with VettaFi | ETF Trends. WisdomTree has not been involved with the preparation of the content supplied by VettaFi | ETF Trends. It does not guarantee, or assume any responsibility for its content.
For more news, information, and analysis, visit the Modern Alpha Content Hub.
