Since the start of the calendar year, EWJ has climbed nearly 5%, comfortably surpassing the roughly 1.6% gain in the broad U.S. large-cap index. This outperformance underscores growing investor conviction that Japanese equities can deliver superior returns in a period of divergent policies and currency moves. Net inflows into the ETF have accelerated, with daily average purchases rising more than 20% compared with the final quarter of last year.

The yen has weakened past the 159 level against the U.S. dollar, its softest point since July 2024, and this depreciation has directly benefited the portfolio’s heavy exposure to multinational manufacturers and exporters. Top holdings such as leading automotive and electronics firms have reported mid-single-digit revenue uplifts from currency translation alone. Analysts estimate that for every one yen drop against the dollar, EWJ’s export-driven constituents see operating profits rise by roughly 1.5%.

EWJ currently trades at an average price-to-earnings multiple below 19x, a relative discount to global peers, while its 12-month dividend yield sits near 2%. However, the combination of a weaker currency and rising local bond yields has few historical precedents in major markets. Japanese 10-year government bond yields have climbed above 0.5%, prompting warnings that further credit-market tightening could dampen equity gains. Market strategists suggest intervention risk increases significantly if the yen approaches the 162–165 per dollar range.

Speculation that Prime Minister Sanae Takaichi may call a snap parliamentary election has injected fresh volatility into currency and equity markets. Takaichi’s commitment to expansionary fiscal measures could further soften the yen but also boost domestic demand and corporate earnings over the medium term. Investors tracking EWJ will be closely watching fiscal budget announcements and any fresh guidance from the Bank of Japan on its yield-curve-control framework for clues on policy continuity and market intervention thresholds.