EWJ Holders Trailed the Currency-Hedged Japan Fund by $21,150 on $300,000 Over 12 Months

Japanese stocks delivered a strong year. Between November 3, 2025, and November 3, 2026, a hypothetical $300,000 in the iShares MSCI Japan ETF (NYSEARCA:EWJ) returned 15.5% including distributions, growing to roughly $346,500. The same amount in the iShares Currency Hedged MSCI Japan ETF (NYSEARCA:HEWJ) returned 22.55%, ending near $367,650. EWJ holders kept $21,150 less. Both funds made money. Many EWJ owners may not realize they also carry a currency bet, and over this stretch it cost them.

Where Your $21,150 Went

HEWJ’s holdings report dated August 31, 2026, shows 99.98% of its net assets sitting in EWJ itself, plus a layer of yen and U.S. dollar currency contracts. HEWJ owns EWJ, then hedges the yen (offsets currency swings). Because the stock basket matches, the comparison isolates much of the currency effect. Currency drove most of the gap, alongside differences in fees and hedging costs.

EWJ’s visible cost looks small. The fund charges a 0.49% expense ratio, or $49 per year per $10,000. On $300,000, that comes to $1,470 a year. The gap over this window dwarfed it, and it never appears on a fee table.

How a Weaker Yen Shrinks Your Gains

EWJ tracks the MSCI Japan Index, a basket of Japanese banks, automakers, chipmakers, and industrial firms priced in yen. Picture a traveler holding yen saved for a Tokyo trip that gets canceled. If the yen weakens before the traveler converts back, the same lot of yen buys fewer dollars. EWJ holders face that conversion every trading day.

Over the measured window, the yen weakened. A dollar bought 154.21 yen on November 3, 2025 and 158.66 yen on November 3, 2026, about 2.9% more. The path was rough: the dollar bought as few as 152.08 yen on January 27, 2026 and as many as 163.94 on July 28, 2026. The return gap tops that end-point move, partly because currency forwards (contracts setting a future exchange rate) build in the interest-rate difference between the two countries. When U.S. rates sit above Japanese rates, that difference can add to a yen-hedged fund’s return.

Hedging Cuts Both Ways

Currency exposure acts differently from a fee. A fee charges you every year. The yen effect flips. The hedge paid off over this period because the yen fell against the dollar.

When the yen strengthens, EWJ holders collect that gain, and HEWJ holders give it up, so this result could reverse in another 12 months. Hedging also carries its own costs, including HEWJ’s cost of rolling currency contracts. Size matters too: EWJ held roughly $22.7 billion in net assets as of August 31, 2026, versus about $774 million for HEWJ.

DXJ’s Bigger Lead Comes With a Catch

The WisdomTree Japan Hedged Equity Fund (NYSEARCA:DXJ) returned 31.72% over the same window. Using the same hypothetical $300,000, EWJ trailed it by $48,660. DXJ follows a different index, holding different stocks than EWJ, so much of that lead comes from stock selection on top of the hedge. Treat it as context only. Its fees sit close to EWJ’s: a 0.48% expense ratio per its July 31, 2026 prospectus, or $48 per $10,000 a year.

Ask This Before Buying Any International Fund

Retirement savers usually buy EWJ for Japanese companies. Every unhedged foreign fund also ties your return to the exchange rate, and that exposure rarely gets top billing in fund marketing. Before adding any international fund, check whether it hedges currency. Then ask yourself one question: do you want your Japan return to depend on the yen-dollar rate, or only on Japanese stocks? Either choice can work. Doing it on purpose protects your money.

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