"DXJ gives U.S. investors exposure to Japanese dividend-paying equities while hedging out the yen-dollar exchange rate. The practical effect: you get the return of Japanese stocks priced in yen, converted to dollars at a fixed rate, without the drag of yen fluctuations. The fund holds 433 stocks, with top positions including Mitsubishi UFJ Financial Group and Toyota Motor, and carries a 0.48% expense ratio."
"The return engine is twofold. Japanese corporate earnings and dividends are being amplified by an ongoing wave of governance reforms pushing companies to return their historically large cash reserves to shareholders. The hedge itself adds a structural advantage when the yen is weakening: unhedged investors lose purchasing power on their returns, while DXJ holders do not."
"DXJ returned 45.92% over the past year while the unhedged iShares MSCI Japan ETF (NYSEARCA:EWJ) returned just 27.41% - despite both funds holding the same underlying Japanese stocks. The gap is almost entirely explained by yen weakness eroding unhedged returns."
DXJ provides U.S. investors exposure to Japanese dividend-paying equities while hedging currency risk through fixed yen-dollar exchange rates. The fund holds 433 stocks including major companies like Mitsubishi UFJ Financial Group and Toyota Motor with a 0.48% expense ratio. Returns are driven by Japanese corporate earnings amplified by governance reforms encouraging cash distribution to shareholders, combined with structural advantages when the yen weakens. Over one year, DXJ returned 45.92% versus unhedged EWJ's 27.41%, with the gap entirely attributable to yen weakness. Over five years, DXJ's 206.1% cumulative return significantly outpaced EWJ's 40.47%, demonstrating how persistent yen weakness erodes unhedged returns.
Read at 24/7 Wall St.
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