Japan’s Nikkei stock market hit a 7 year high today as the index gained over 5%. On the other hand, the yen headed south to its lowest since early 2008 against the dollar, and lost more than 1% during one day. The sharp market and currency movements are the result of the today’s Bank of Japan surprise monetary easing decision.
The BOJ unexpectedly surprised investors and eased monetary policy on a 5-4 vote raising its monetary base target to an annual increase of ¥80T yen ($724.5B), from ¥60T-70T. The bank also decided to triple purchases of ETFs and REITs. The decision is predominantly due to concerns that a decline in oil prices would weigh on consumer prices and could cause a deflationary pressure.
Investors who want to gain exposure to the Japanese equity market can buy two very, liquid exchange traded funds.
The first one is iShares MSCI Japan ETF (EWJ), which is $13.7bn in size as of 30th October 2014 and offers exposure to the yen.
The second product is WisdomTree Japan Hedged Equity Fund (DXJ), which holds $10.3bn AUM as of 30th October 2014 and neutralizes the risk of the Japanese yen’s fluctuations relative to the USD.
ETFs: EWJ, DXJ
Source: Reuters, Seeking Alpha, iShares, WisdomTree
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