What Japan’s New Political Party Brings To Small-Cap ETFs

As the dominant Japanese party settles itself in the government, a shift in the governmental agenda may become beneficial to Japanese small-cap-related exchange traded funds (ETFs).

The Democratic Party of Japan (DPJ), the new leading political party in Japan, wants to increase spending at home, which would help small businesses by stimulating domestic consumption, writes Roger Nusbaum for TheStreet.

Fortunately for ETF investors, iShares MSCI Japan Small Cap Index (SCJ), SPDR Russell/Nomura Small Cap Japan (JSC) and WisdomTree Japan SmallCap Dividend (DFJ) can provide access to Japanese small-cap performance. Their expense ratios range between 0.53% to 0.58%.

Sector weightings are more or less similar for all three ETFs: industrials are around mid-20%; discretionary is about 20%; materials are mid- to low-teens. The more notable discrepancy is that SCJ has a higher weighting in financials with 18%.

Japan is still grappling with the burden of high debt, an aging population and reliance on foreign oil. The positive aspect of the country is that Japan is the world’s second-largest economy that has a high-wage work force and a well-educated populace.

• iShares MSCI Japan Small Cap Index: up 12.4% year-to-date; dividend yield is 1.55%

• SPDR Russell/Nomura Small Cap Japan: up 14.1% year-to-date; dividend yield is 1.40%

• WisdomTree Japan SmallCap Dividend: up 10.2% year-to-date; dividend yield is 2%

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