Japan-focused ETFs rallied sharply on Wednesday after the U.S. and Japan struck a high-profile trade agreement that appears to stave off the threat of steep tariffs.
The three largest U.S.-listed Japan-focused ETFs—the iShares MSCI Japan ETF (EWJ), the JPMorgan BetaBuilders Japan ETF (BBJP) and the WisdomTree Japan Hedged Equity Fund (DXJ)—each gained around 4.5% on the day, hitting fresh highs for the year.
The surge came after President Donald Trump posted late Tuesday on Truth Social, “We just completed a massive Deal with Japan, perhaps the largest Deal ever made. Japan will invest, at my direction, $550 Billion Dollars into the United States, which will receive 90% of the Profits.”
He added that Japan would open its markets to U.S. exports—including cars, trucks, rice and other agricultural goods—and that he would impose “Reciprocal Tariffs” of 15% on U.S. imports of Japanese goods.
Crucially, the 15% tariff rate applies to autos, which means Japan avoids the 25% import tariff Trump had previously threatened on foreign-made vehicles.
That was welcome news for investors. The U.S. accounts for roughly a fifth of Japan’s exports, with vehicles making up a sizable share. A 25% tariff on autos would have been a major blow to Japan’s economy and its auto sector in particular.
Instead, Toyota Motor Corp. (TM), the top holding in EWJ (at 4%) and BBJP (at 4.6%) and the second-largest holding in DXJ (at 4.6%), surged more than 13% on Wednesday. Other major Japanese automakers, including Honda Motor Co. (HMC) and Nissan Motor Co., also posted double-digit gains.
|
Holding |
Allocation % |
|
Toyota Motor Corp. |
4.1% |
|
Mitsubishi UFJ Financial Group Inc. |
3.9% |
|
Sony Group Corp. |
3.8% |
|
Hitachi |
3.4% |
|
Nintendo Co. |
2.5% |
|
Sumitomo Mitsui Financial Group Inc. |
2.3% |
|
Tokyo Electron |
2.1% |
|
Recruit Holdings Co. |
1.9% |
|
Keyence Corp. |
1.9% |
|
Tokio Marine Holdings Inc. |
1.9% |
|
SoftBank Group Corp. |
1.8% |
Source: etf.com & FactSet Data
With the rally, Japan ETFs rose to all-time highs. EWJ and BBJP are now up nearly 15% year to date, while DXJ is up just over 10%.
Currency exposure accounts for a significant portion of the performance divergence. DXJ hedges the Japanese yen, which has rallied against the U.S. dollar in 2025. That’s weighed on DXJ relative to unhedged funds like EWJ and BBJP.
But the reverse was true last year when the yen tumbled and DXJ soared nearly 30%, compared to 7% gains for the other two funds.