Japan ETF Gains 41% in 12 Months as Takaichi’s Stimulus Spurs 2.1% GDP Growth
iShares MSCI Japan ETF delivered a 41% return over the past 12 months while the Nikkei 225 surged 24% year-to-date. Prime Minister Sanae Takaichi’s fiscal stimulus—backed by multi-year AI, semiconductor and shipbuilding investments—fueled a 2.1% annualized Q1 2026 GDP gain, with yen weakness magnifying unhedged ETF returns.
1. EWJ’s 41% Return and Market Context
iShares MSCI Japan ETF returned roughly 41% over the past 12 months while the Nikkei 225 rallied 24% year-to-date, making it the best-performing major index globally this year. Currency-hedged DXJ outpaced EWJ with a 46% return over the same period, underscoring the impact of a yen trading around ¥158 per dollar on unhedged funds.
2. Takaichi’s Fiscal Stimulus Measures
Since taking office in late 2025, Prime Minister Sanae Takaichi has targeted economic stagnation by boosting state-led investment in artificial intelligence, semiconductors and shipbuilding. Her administration implemented multi-year spending frameworks and long-term investment funds, contributing to private consumption and corporate investment that drove a 2.1% annualized GDP expansion in Q1 2026, above the 1.7% consensus.
3. Currency Effects and BoJ Outlook
The yen’s depreciation has created a substantial performance gap between unhedged and hedged Japan ETFs, favoring the latter in dollar terms. The Bank of Japan faces pressure to consider rate hikes as producer inflation surprises on the upside, but must balance that against the risk of derailing the recovery, which will determine future yen strength and ETF returns.