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【Japan ETF】Which Japanese Stock Market ETFs are available to invest directly in the Japanese Stock Market?

Due to the outstanding performance of the market, the Japanese stock market has recently attracted the attention of investors around the world. In previous articles, we have shared someJapanese ETFs in Hong Kong stocks and US stocksFor everyone to make an investment decision.

As mentioned earlier, investing with an exchange-traded fund (ETF) has multiple advantages:

  • First of all, ETFs have extremely high liquidity, allowing investors to trade ETFs as easily as trading stocks at any time of the trading day, enabling flexibility and timeliness of asset allocation.

  • Second, ETFs typically have lower management fees and save a lot of costs compared to actively managed funds, which favors the accumulation of long-term investment returns.

  • In addition, ETFs diversify the portfolio by replicating an index or industry segment, effectively dispersing the risks posed by a single security.

  • Finally, ETFs are more transparent, allowing investors to have a clear understanding of their underlying asset allocation, making it easier to manage and monitor the performance of their portfolios.

As such, ETFs are an integral part of modern portfolio construction and are an ideal tool for both individual and institutional investors to achieve investment objectives and risk management.

Then does Japan itself have a native Japanese ETF that can be bought directly on the Japanese exchange.

This makes it convenient to have a reserve of trading tools when holding yen in your own hands or earning yen for long-term investments.

Please follow the introduction below to find out more ~

1. Through which Japanese ETFs can I directly seize the investment opportunities of the Japanese domestic stock market?

In the investment charts of the Japanese stock market, investors can effectively participate and track the performance of the overall Japanese stock market through this convenient tool for exchange-traded funds (ETFs). Here are three highly representative direct-tracking ETFs for the Japanese stock market, each targeting different market benchmarks, providing investors with a variety of market insights and investment strategies.

ETFs that directly track the overall performance of the Japanese stock market

1. $NEXT FUNDS TOPIX ETF(1306.JP)$

NEXT FUNDS TOPIX ETF (1306.JP)
NEXT FUNDS TOPIX ETF (1306.JP)

The assets are 23.46 trillion yen, with a total volume of about 200,000 in March. Track the performance of the TOPIX index.

THE INVESTMENT OBJECTIVE OF THIS ETF IS TO TRACK THE PERFORMANCE OF THE JAPANESE STOCK MARKET, ESPECIALLY THE TOPIX INDEX, PROVIDING INVESTORS WITH EXTENSIVE EXPOSURE TO THE JAPANESE STOCK MARKET. The ETF's portfolio consists mainly of Japanese stocks, including TOPIX index constituents. THE TOPIX INDEX IS ONE OF THE MAJOR INDICES OF THE JAPANESE STOCK MARKET, COMPRISING SHARES OF APPROXIMATELY 2000 LISTED COMPANIES IN JAPAN, COVERING VARIOUS INDUSTRIES AND SECTORS. IT IS ONE OF THE LARGEST ETFS ON THE JAPANESE MARKET. The ETF seeks long-term stable capital gains by investing in these stocks.

2. $NEXT FUNDS Nikkei 225 ETF(1321.JP)$

NEXT FUNDS Nikkei 225 ETF (1321.JP)
NEXT FUNDS Nikkei 225 ETF (1321.JP)

The size of the assets is about JPY 11 trillion and the volume traded around 40,000 in March follows the performance of the JPY 225 index. The Nikkei 225 index is another major index of the Japanese stock market, comprising 225 stocks of listed Japanese companies. Compared to the asset companies in the TOPIX, the JPY 225 index has a higher concentration of industries, including blue-chip stocks, and of course, the size of assets and the volume of transactions are relatively lower.

3. $iFreeETF JPX-Nikkei400(1599.JP)$

iFreeETF JPX-Nikkei400 (1599.JP)
iFreeETF JPX-Nikkei400 (1599.JP)

The ETF has an asset size of about ¥4590 billion, with a trading volume of about 1,000 as of March. It tracks the JPX-Nikkei 400 index, which selects 400 companies with higher levels of management and profitability listed on Japanese exchanges. The index's component screening mechanism, in addition to considering market capitalization, emphasizes the quality and financial stability of an enterprise's operations, including but not limited to indicators such as profitability, shareholder returns, corporate transparency, and board structure.

Second, what are the Japanese ETF products that track the global market?

Faced with an increasingly globalized financial market, Japanese investors can also reach a wide swath of international markets through ETF products issued locally in Japan. The following three ETF products target the performance of U.S. equity markets, Chinese tech startups and global equity markets, opening the door for investors to invest across borders.

ETFs issued in Japan that track global market performance:

1. $MAXIS S&P500 US Equity ETF(2558.JP)$

MAXIS S&P500 US Equity ETF (2558.JP)
MAXIS S&P500 US Equity ETF (2558.JP)

It is an ETF managed on behalf of Mitsubishi Financial Group in Japan. The ETF's investment objective is to track the performance of the U.S. stock market, especially the S&P 500 index, to provide investors with opportunities in the U.S. stock market. The ETF has an asset size of about 559 billion yen, with a trading volume of 300,000 as of March, and an increase of about 58% in early 2023.

2. $iFreeETF China STAR50(2628.JP)$

iFreeETF China STAR50 (2628.JP)
iFreeETF China STAR50 (2628.JP)

CHINA'S STAR50 INDEX SELECTS 50 LISTED COMPANIES IN CHINA'S TECH SECTOR, AN ETF THAT TRACKS THE PERFORMANCE OF CHINESE TECH ENTERPRISES AND AIMS TO ENABLE INVESTORS TO ENGAGE WITH CHINA'S MOST INNOVATIVE AND GROWTH POTENTIAL TECHNOLOGY COMPANIES THROUGH A SINGLE FUND PRODUCT. The ETF had a trading volume of 2,000 units and an asset size of about 3.93 billion yen as of March. It belongs to a small range ETF listed in Japan.

3. $MAXIS World Equity (MSCI ACWI) ETF(2559.JP)$

MAXIS World Equity (MSCI ACWI) ETF (2559.JP)
MAXIS World Equity (MSCI ACWI) ETF (2559.JP)

It is an ETF managed on behalf of Mitsubishi Financial Group in Japan. The ETF's investment objective is to track the performance of the MSCI ACWI index, providing investors with investment opportunities in global equity markets. The MSCI ACWI Index is a global stock market index compiled by MSCI Corporation, comprising 23 emerging market and 24 emerging market stocks, covering most of the market capitalization of global equity markets. The ETF's portfolio consists primarily of MSCI ACWI index constituents and aims to achieve long-term stable capital gains by investing in these stocks. As of March, the ETF had a trading volume of about 2,000 units and an asset size of about 456 billion yen, an increase of about 42% in the first 23 years to date.

3. Leverage return: understand the leveraged ETF of the Japanese stock market

IN FINANCIAL MARKETS, LEVERAGED ETFS SERVE AS AN INNOVATIVE FINANCIAL TOOL THAT OFFERS INVESTORS THE POSSIBILITY OF MAGNIFYING THE EFFECTS OF MARKET VOLATILITY, GIVING THEM THE OPPORTUNITY TO EARN HIGHER RETURNS WHEN PREDICTING THE MARKET DIRECTION CORRECTLY, BUT ALSO POTENTIALLY FACING THE SAME LEVEL OF LOSSES.

Leveraged ETFs issued in Japan:

1. $NEXT FUNDS Nikkei 225 Leveraged Idx ETF(1570.JP)$

NEXT FUNDS Nikkei 225 Leveraged Idx ETF (1570.JP)
NEXT FUNDS Nikkei 225 Leveraged Idx ETF (1570.JP)

Managed by Tokai Waseda Investment Advisors Limited, Japan, tracks a twofold daily decline of the JPY 225 index and aims to provide leverage for the JPY 225 index. The size of the assets was about ¥2705 billion and the total volume of sales in March was around 200,000, up 148% from the beginning of the year 23.

2. $Nikkei225 Bear -2x ETF(1360.JP)$

Nikkei225 Bear -2x ETF (1360.JP)
Nikkei225 Bear -2x ETF (1360.JP)

It is a leveraged ETF managed by Waseda Corporation of Tokai, Japan. The ETF's portfolio consists mainly of components of the JPE-225 index, but the strategy is to follow the decline twice as fast as the day, i.e. the YP225 index will fall 1% on the day, and the ETF's net worth will drop 2%. It is listed on the Japan Stock Exchange and investors can buy it through a securities broker or online trading platform. The ETF has a management rate of 0.65% and a higher rate. The size of the assets was about 474 billion yen, and the total volume of sales in March was about 3 million, a decrease of 64.76% in the beginning of 23 years.

HOWEVER, LEVERAGED ETFS ARE ETFS THAT USE FINANCIAL DERIVATIVES SUCH AS OPTIONS AND SWAP AGREEMENTS TO MAGNIFY THE DAILY RETURNS OF THE BENCHMARK INDICES THEY TRACK. ALTHOUGH THESE PRODUCTS TYPICALLY OFFER 2X OR 3X DAILY RETURNS, THEY CARRY EXTREMELY HIGH RISKS AND ARE NOT SUITABLE FOR LONG-TERM POSITIONS.

Overall, an ETF is like a key to opening the door to diversified investment, capturing both the potential for returns on the market as a whole and diversifying the risks of individual securities to a certain extent. However, like all investment instruments, ETFs are not risk-free, and market volatility, liquidity risks, tracking errors, and industry-specific upturns all have a direct impact on investor returns.

As such, while embracing the return opportunities offered by ETFs, wise investors also need an in-depth understanding of potential risks and prudent coping strategies.

After all, it is only with a clear understanding of the delicate balance between risk and return that you can be more stable on the investment path and achieve long-term appreciation and preservation of assets.

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