Top Japan ETFs for 2023

Exchange-traded funds (ETFs) focused on Japan provide investors with exposure to the country’s economic growth and business profits. Japan is the third-largest economy in the world as measured by gross domestic product (GDP), according to 2021 data, the most recent available from The World Bank.

Japan’s economy suffered a major contraction during the pandemic but it is showing signs of recovery. The economy grew at an annualized rate of 2.7% in the first quarter of 2023, driven by increases in domestic consumption of goods and services. Despite ongoing inflation challenges, the International Monetary Fund forecasts Japan’s GDP will grow 1.3% in 2023.

The country is home to many large, well-known multinational corporations, including Honda Motor Co. (HMC) and Sony Group Corp. (SONY). Japan ETFs offer investors the opportunity to profit from the growth of these businesses and many other companies. Japanese equities, as measured by the MSCI Japan Index, have returned more than 25% in the past year, compared with the S&P 500’s total return of about 16%.

Below, we look at the three Japan-focused ETFs with the lowest fees, the best 12-month return, and the most liquidity, respectively. We have excluded leveraged ETFs, which provide outsized returns but come with extra risk. All data below is as of June 22, 2023.

• Performance over one year: 20.7%
• Expense ratio: 0.09%
• Annual dividend yield: 2.07%
• 30-day average daily volume: 458,621
• Assets under management: $1.3 billion
• Inception date: Nov. 2, 2017
• Issuer: Franklin Templeton

FLJP holds a portfolio of more than 500 large- and mid-sized Japanese equities, providing broad exposure to a variety of sectors. The fund aims to replicate the performance of the FTSE Japan Capped Index. Industrials, consumer discretionary, and information technology stocks occupy the largest parts of the portfolio. The fund’s top holdings include Toyota Motor Corp. (7203:TKS), Sony Group, and Keyence Corp. (6861:TKS).

• Performance over one year: 22.1%
• Expense ratio: 0.48%
• Annual dividend yield: 1.05%
• 30-day average daily volume: 18,615
• Assets under management: $80 million
• Inception date: Oct. 23, 2001
• Issuer: BlackRock Financial Management

JPXN provides exposure to large- and mid-capitalization Japanese equities selected for their “perceived shareholder-friendly activities,” including profitability and return on equity. The benchmark index for the fund is the JPX-Nikkei Index 400. JPXN holds roughly 400 individual stocks, with no single name currently accounting for more than 2% of assets. The producer manufacturing, financial, and health technology sectors are the best represented in the portfolio. The fund’s top holdings include Mitsubishi Corp. (8058:TKS), Mitsui & Co. (8031:TKS), and Sumitomo Mitsui Financial Group.

• Performance over one year: 20.8%
• Expense ratio: 0.50%
• Annual dividend yield: 0.89%
• 30-day average daily volume: 8,269,708
• AUM: $13 billion
• Inception date: March 12, 1996
• Issuer: BlackRock Financial Management

EWJ is the oldest Japan ETF and the largest by assets under management, as well as the most liquid by a wide margin. The fund holds a portfolio of about 240 large-cap Japanese equities and tracks the benchmark MSCI Japan Index. Industrials stocks occupy the largest part of the portfolio, followed by consumer discretionary and information technology names. The top holdings of the fund include Toyota, Sony Group, and Keyence.

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As of the date this article was written, the author does not own any of the above ETFs.