Trackinsight: Japan Equity ETFs witness outflows amid global risks

Japan ETFs have witnessed over $500 million in outflows globally amid inflationary and geopolitical risks.

Inflationary and geopolitical risks weigh on the Japanese Market. Japan's Benchmark Index, the Nikkei 225, dropped -2.23% to close at 27,079 while the broader Topix Index lost -1.63% to 1,931 on Monday, as Japanese markets mimic sharp losses on Wall Street, triggered by inflationary and geopolitical risks. Nearly all sectors in the Japanese market fell, with growth-oriented technology firms leading the decline. Notable decliners of the Nikkei 225 include Bridgestone Corp. (-8.92%), Z Holdings (-5.06%), Hitachi Ltd. (-4.21%), Softbank Group. (-3.92%), and Toyota Motor Corp. (-3.19%).

Japan ETFs see notable outflows

Year-to-date, Japan Equity ETFs have witnessed over $500 million in outflows globally on fears that the Bank of Japan might follow the Federal Reserve and other central banks in withdrawing ultra-loose monetary policy and other stimuli that are boosting share prices.

Noteworthy ETF flow movements in America

Among the flow bleeders in America are the iShares MSCI Japan ETF (EWJ, -$256 million), iShares Currency Hedged MSCI Japan ETF (HEWJ, -$190 million), and Franklin FTSE Japan Index ETF (FLJA, -$23 million). JPMorgan BetaBuilders Japan ETF (BBJP) on the other hand saw positive inflows of $284 million. The fund tracks the Morningstar Japan Target Market Exposure IndexSM and invests in Japanese stocks trading primarily on the Tokyo and Nagoya Stock Exchanges. BBJP has 23% exposure to Industrials, 20.3% to Consumer Discretionary, and 12.8% to Information technology. The top leading names among the 329 holdings include Toyota Motor (5.89%), Sony Group (3.21%), Keyence Corp. (2.29%), Mitsubishi UFJ Financial (1.97%), and Recruit Holdings (1.96%). The fund has a total expense ratio of 0.19% and trades primarily on the CBOE Global Markets Exchange.

Noteworthy ETF flow movements in Europe

In Europe, Japan ETFs exhibited large outflows, with 8 ETFs losing over $100 million each in net flows this year, including the UBS line-ups of MSCI Japan Socially Responsible UCITS ETFs (-$790 million) and MSCI Japan UCITS ETFs (JPNA & UIM5, -1,022 million). In addition, the Fidelity Sustainable Research Enhanced Japan Equity UCITS ETF (FJPS) and iShares MSCI Japan UCITS ETF (IJPN) lost -$289 and -$163 million respectively. Among ETFs that received positive flows are iShares MSCI Japan ESG Screened UCITS ETF (SAJP, $71 million), Xtrackers MSCI Japan UCITS ETF (XMK9, $60 million), and iShares MSCI Japan USD Hedged UCITS ETF (IJDP, $57 million).

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