Japan’s Nikkei Hits 63,799 as ETFs Rally 41–46% on Fiscal Stimulus
Nikkei 225 reached 63,799 on May 14, up 24% year to date, boosting EWJ by 41% and DXJ by 46% over the past year. Prime Minister Sanae Takaichi’s fiscal plans—state-led AI, semiconductor, and shipbuilding funds—drove Q1 GDP to 2.1%, exceeding the 1.7% estimate.
1. ETF Performance Surge
Japan’s equity market rally has propelled major ETFs, with the Nikkei 225 topping 63,799 on May 14 and delivering a 24% gain year to date. Unhedged funds like EWJ returned roughly 41% over the past 12 months, while hedged vehicles posted about 46%, and BBJP mirrored much of this upswing with its unhedged exposure.
2. Government Stimulus Under Takaichi
Prime Minister Sanae Takaichi implemented multi-year investment frameworks targeting artificial intelligence, semiconductors and shipbuilding to combat stagnation. These state-led capital commitments helped Q1 GDP expand at a 2.1% annualized rate, above the 1.7% consensus, supported by gains in private consumption and corporate investment.
3. Currency Dynamics and BBJP Positioning
The yen weakened to around 158 per dollar, creating a pronounced drag on unhedged ETF returns and a performance gap versus hedged alternatives. Investors in BBJP should weigh its unhedged structure, as further yen depreciation would dampen dollar returns, while any BoJ rate hikes could strengthen the yen and narrow this gap.