The pro-Japan quantitative easing trade is coming to an end. At least that is what Credit Suisse has telegraphed in its global equity strategy sector outlook. The firm’s Andrew Garthwaite calls it a close call, but says to reduce the overweight allocation for Japan. The firm is reducing its weightings in Japan to a small overweight of 2%, down from 12% to reflect concerns about what lies ahead.

The first issue brought up is a weakening economic momentum in Japan, as some Japanese leading indicators have fallen sharply and could weaken further after April’s consumption tax hike. This could act as a 1% drag on gross domestic product. Weaker growth in the rest of Asia is another factor, since half of Japanese exports go to Asia. This is not even being helped despite previous yen weakness.

Garthwaite also said that the global growth momentum appears to have plateaued, with Japan’s equity market the most leveraged to global growth. He also believes that if there is no reform or further Bank of Japan stimulus, investors should be very underweight the Nikkei.

Other factors cited were a risk of a pullback by foreign investors, since as much as 70% of the $178 billion of net foreign buying of Japanese equities that was seen since November 2012 has registered negative relative returns if unhedged.

There are some positives still there for Japan in the call. As far as valuation, Japan’s price-to-earnings (P/E) ratios relative to global markets are at historical lows. Also, Prime Minister Abe’s popularity is still at levels that allow him to implement change. Another risk is that the Bank of Japan is on track to miss its 2% inflation target, implying further easing later this year. Also, earnings momentum in Japan is still the strongest of any major region, and some 54% of households’ financial assets are still being held in cash.

Unfortunately, as you can see with the key exchange traded funds (ETFs), much of the pulling back off the highs has already taken place.

As far as the ETFs, the most liquid has been the iShares MSCI Japan (NYSEMKT: EWJ). It trades at $11.09, and its 52-week range is $10.36 to $12.43, signaling that it is way off the highs as it is unhedged. This ETF trades around 36 million shares per day.

The WisdomTree Japan Hedged Equity (NYSEMKT: DXJ) was the more recent favorite during the Abenomics gains of 2013 because it hedges for the dollar-yen risk. Still, at $45.95, it has a 52-week range is $40.73 to $53.95. Its volume is down to about 6 million to 7 million shares per day.

The WisdomTree Japan Hedged Equity ETF has pulled back 14.8% from its 52-week high, and the iShares MSCI Japan ETF has pulled back 10.7% from its 52-week high.

There is also the iShares MSCI Japan Small-Cap (NYSEMKT: SCJ) ETF, which tracks the investment results of the MSCI Japan Small Cap Index. This is very thin in trading volume, but, trading at $51.23, its 52-week range is $45.99 to $56.24. So the small cap unhedged drop from its peak has been almost 9%.

The hedged version of the small cap ETF is the WisdomTree Japan Hedged SmallCap Equity (NYSEMKT: DXJS). It trades at $28.08. The 52-week range is actually less than a year, but that is $25.00 to $30.92 — for a 9.2% drop from its peak.

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