This MSCI Japan ETF Has Had a Sneaky Good Run, Soaring 23% While Everyone Slept on It

"While U.S. investors piled into domestic equities throughout 2025, Japan quietly delivered one of the year's strongest performances. The iShares MSCI Japan ETF ( NYSEARCA:EWJ) returned 29% over the past year, crushing the S&P 500's 17% gain by 12 percentage points. For 2026, Japan's setup looks compelling. Corporate governance reforms continue reshaping capital allocation, pushing firms toward shareholder returns rather than cash hoarding."

"The return engine combines equity appreciation from Japanese corporate performance and currency movement through unhedged yen exposure. When Japanese stocks rise and the yen strengthens against the dollar, returns amplify. When the yen weakens, it creates a headwind. The yen has depreciated roughly 6% since September 2025, trading at 0.00639 USD per yen as of early January 2026, yet EWJ still delivered strong returns as equity gains overwhelmed currency drag."

"This ETF provides exposure to 187 large and mid-cap Japanese companies through MSCI Japan Index replication. The portfolio leans into Japan's industrial and technology strengths, with Toyota Motor at 4.5%, Mitsubishi UFJ Financial at 4.0%, and Sony Group at 3.5% leading holdings. The top 10 positions represent 28% of assets. With a 0.49% expense ratio and $15.8 billion in assets, EWJ offers deep liquidity and nearly 30 years of operational history."

EWJ returned 29% over the past year, outperforming the S&P 500 by 12 percentage points. The ETF tracks the MSCI Japan Index and holds 187 large- and mid-cap companies, with Toyota, Mitsubishi UFJ Financial and Sony among the largest positions; the top ten account for 28% of assets. Equity gains and unhedged yen movements jointly drive returns, so yen strength amplifies performance while yen weakness creates headwinds. The yen depreciated about 6% since September 2025, yet equity appreciation offset currency drag. EWJ charges a 0.49% expense ratio, has $15.8 billion AUM, 6% turnover and a 1.34% dividend yield. Corporate governance reforms and BOJ rate normalization support a constructive outlook for Japanese equities in 2026.

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