How ETFs Covering Japan Reacted to Bank of Japan, and How They Are Anticipating FOMC

Jon C. Ogg

For better or worse, quantitative easing is going to remain a part of our lives for longer. 24/7 Wall St. already has covered the Bank of Japan’s continued efforts in quantitative easing (Abenomics) after its official interest rate policy moves on Wednesday. We also have covered roughly 10 reasons the markets are not calling for a U.S. rate hike at this time from the Federal Reserve and Fed Chair Janet Yellen.

The Bank of Japan voted seven to two to keep interest rates flat, with the official deposit rate unchanged at −0.1%. It also issued a series of changes to how it will approach stimulative efforts by continuing to make Japanese government bond purchases roughly at the same 80 trillion yen level. That is roughly $787 billion in dollar terms.

24/7 Wall St. wanted to take a closer look at how the key exchange traded funds (ETFs) and exchange traded notes/products (ETN/ETP) that track Japan have reacted to the Bank of Japan’s news ahead of Wednesday’s Federal Open Market Committee (FOMC) formal announcement.

As a reminder, the Bank of Japan has been a net-buyer of ETFs in Japan. Here is how the action is looking in the top four ETFs covering Japan after the opening bell on Wednesday.

The iShares MSCI Japan ETF (NYSEMKT: EWJ) is the largest of the Japanese ETFs and dates well back into the 1990s. Its initial opening price was $12.64, versus a $12.30 close. About 10 minutes after the opening bell the ETF was up 2.8% at $12.655, versus a 52-week range of $10.18 to $12.66, and that 52-week high was Wednesday morning. The iShares MSCI Japan ETF has a whopping $14.04 billion in assets.

WisdomTree Japan Hedged Equity ETF (NYSEMKT: DXJ) opened at $42.99, after closing at $42.07 the prior day. After 10 minutes of trading, its shares were up 2% at $42.91. The WisdomTree Japan Hedged Equity ETF has a 52-week range of $37.05 to $55.80. It grew in assets as the Bank of Japan weakened the yen and was buying everything under the sun, and its current assets in the hedged ETF were last seen at about $6.9 billion.

Then there is the Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEMKT: DBJP), which has over $1 billion in assets and was last seen trading up 1.85% at $32.95. Its prior closing price was $32.35, and its opening bell price was at $33.01 on Wednesday. It has a 52-week range of $29.15 to $41.23.

There is also the key CurrencyShares Japanese Yen ETF (NYSEMKT: FXY). This ETF tracks the price of the Japanese yen, so it is a currency play for those who do not have forex trading capabilities. It closed at $94.90 on Tuesday and opened at $95.80 on Wednesday. Keep in mind that the official yen price is .0098 U.S. dollars, or 101.57 on the inverses basis.

As a reminder, the FOMC announcement is due at 2:00 p.m. Eastern Time.