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iShares MSCI Japan ETF

EWJ:NYSE

equity ETF | passive | BlackRock, Inc. | Tracks MSCI

Market Price

US$84.63 (26 Jan 2026)

+25.89% (YoY)

NAV

US$84.83

-0.23% Discount

Yield

4.53%

Expense Ratio

49.00%

+26% vs Avg: 39.00%

Box Set (ETF)

⚡ Executive Summary

📊 The Bottom Line

This ETF tracks the MSCI Japan Index, providing exposure to large and mid-capitalization Japanese equities. EWJ offers a highly liquid and diversified way to invest in one of the world's largest economies. Bull case projects NAV reaching US$97.55 (+15%), while bear case suggests US$72.11 (-15%) over 12-18 months. Its low bid-ask spread makes it an efficient tool for accessing the Japanese market.

⚖️ Risk vs Reward

Japanese equities, as represented by EWJ's holdings, currently trade at a P/E ratio of 19.67x and a P/B ratio of 1.98x. This valuation is above its historical 5-year and 10-year averages, suggesting fair to slightly elevated pricing relative to its own history. The Japanese market has seen robust performance recently, outperforming many developed markets, but faces potential headwinds from global economic slowdowns and yen fluctuations. The upside potential is driven by ongoing corporate reforms and inflation, while downside risks include a stronger yen impacting exporters and geopolitical instability. The ETF's broad diversification helps mitigate single-stock risk within this context.

🚀 Why EWJ Could Soar

• Corporate governance reforms in Japan are improving shareholder returns, driving re-ratings for many underlying companies, potentially boosting NAV by 10-15% over the next year.
• Inflationary pressures are finally taking hold in Japan, leading to sustained economic growth and higher corporate earnings not seen in decades, which could push equity prices up by 10% annually.
• A weaker Japanese Yen makes Japanese exports more competitive globally, benefiting the large-cap export-oriented companies that dominate EWJ's portfolio, contributing 5-7% to returns.

⚠️ What Could Go Wrong

• A significant strengthening of the Japanese Yen could negatively impact the profitability of Japan's export-heavy companies, potentially dragging NAV down by 10-12%.
• Unexpected global economic slowdowns or a recession in major trading partners could reduce demand for Japanese exports, leading to a 8-10% decline in corporate earnings.
• Persistent deflationary pressures or an inability of the Bank of Japan to sustainably achieve its inflation target could dampen investor confidence and lead to multiple compression of 5-8%.

🏢 Fund Overview

What Are You Actually Buying

The Japanese equity market comprises publicly traded companies in Japan, representing the third-largest economy globally. It is characterized by leading global manufacturers, technology firms, and financial institutions.
EWJ specifically targets large and mid-capitalization segments of the Japanese equity market, offering exposure to established industry leaders and significant domestic players.
The market has historically been influenced by global trade dynamics, currency fluctuations (especially the Japanese Yen), domestic economic policies, and a shift towards improved corporate governance.

Market Dynamics & Outlook

The Japanese equity market is currently experiencing renewed investor interest, driven by positive corporate earnings, shareholder-friendly reforms, and a gradual exit from deflation.
Monetary policy by the Bank of Japan (BoJ) remains accommodative, though there are expectations of eventual normalization, which could impact bond yields and the Yen's value.
Geopolitical risks in Asia and global economic uncertainties, particularly regarding inflation and interest rates in other major economies, remain key factors influencing market sentiment and performance.

🎯 Why This Matters

Understanding Japan's evolving corporate landscape and its susceptibility to global economic and currency shifts is crucial. Current reforms and a nascent inflationary environment present a potential inflection point for long-dormant valuations, making timely insights essential for investors assessing the region.

📈 Valuation & Analysis

Historical Performance

YTD

+5.37%

+25.92%

Yearly Growth (3Y)

+17.22%

Yearly Growth (5Y)

+6.22%

Yearly Growth (10Y)

+7.23%

Yearly Growth (Since Inception)

+2.38%

Current Valuation

The iShares MSCI Japan ETF's underlying holdings trade at an aggregate P/E ratio of 19.67x and a P/B ratio of 1.98x as of January 23, 2026. This P/E is notably above Japan's historical 5-year average of 14.84x and its 10-year average of 14.21x. While the current valuation reflects recent strong market performance and optimism surrounding corporate reforms, it also indicates that the market is no longer as cheaply valued as in prior periods. The ETF currently offers a 30-day SEC yield of 1.35%. This suggests a fair valuation, leaning towards slightly expensive compared to its own historical averages, highlighting the importance of sustained earnings growth to justify current price levels.

The Bull Case - Upside to

Sustained Corporate Reform Momentum

High Probability

Continued focus on shareholder returns and efficiency by Japanese corporations could drive a 15-20% re-rating of P/E multiples, adding US$12-US$17 to NAV by improving investor confidence.

Yen Weakness Supports Export Sector

Medium Probability

A persistently weaker Japanese Yen (e.g., above 150 JPY/USD) enhances the competitiveness and profitability of major exporters in the ETF, translating to a 8-10% boost in earnings per share and NAV.

Return of Inflation and Wage Growth

Medium Probability

A definitive end to deflation and a sustained increase in wages could fuel domestic consumption and corporate pricing power, potentially increasing earnings by 5-7% and supporting higher equity valuations.

The Bear Case - Downside to

Significant Yen Appreciation

Medium Probability

A rapid strengthening of the Japanese Yen (e.g., below 130 JPY/USD) would severely erode the overseas earnings of multinational corporations, potentially leading to a 10-15% decline in NAV.

Global Economic Slowdown

Medium Probability

A sharper-than-expected global economic slowdown, particularly in key trading partners like the US and China, could reduce demand for Japanese goods and services, resulting in a 8-12% drop in corporate revenues.

Failed Policy Normalization by BoJ

Low Probability

Any missteps or perceived failures by the Bank of Japan in normalizing monetary policy could destabilize the bond market, trigger investor outflows, and lead to a 5-10% market correction.

Risk/Reward Assessment

The risk-reward profile for EWJ is balanced, leaning positive due to ongoing structural changes in the Japanese economy. The bull case highlights significant catalysts such as corporate reforms and a favorable currency environment that could drive substantial upside. However, the market's recent strong performance means that valuations are no longer at historical lows, introducing more sensitivity to economic headwinds. The primary risks stem from external factors like global demand and internal monetary policy shifts. Investors should weigh the compelling long-term reform story against the short-term currency volatility and global macro risks. While upside is attractive, prudent investors should acknowledge the potential for pullbacks if key economic drivers falter.

Peer Comparison

EWJ stands out among Japanese equity ETFs for several reasons, making it a cornerstone for broad market exposure. Its significant assets under management (AUM) ensure robust liquidity and tighter bid-ask spreads, which translates into efficient trading for investors. While its expense ratio is slightly higher than some newer, often smaller competitors, its deep history and established market presence, as the oldest Japan-focused ETF, provide reliability. The fund offers comprehensive exposure to large and mid-cap companies, aligning closely with the broader MSCI Japan Index. This makes it a preferred choice for investors seeking foundational, unhedged exposure to the Japanese market, where liquidity and tracking integrity are paramount.

Fund	Expense Ratio	AUM (B)	1Y Return	3Y Return	5Y Return	Yield
iShares MSCI Japan ETF (EWJ) ⭐	49.00%	US$16.8B	25.92%	17.22%	6.22%	1.35%
Franklin FTSE Japan ETF (FLJP)	9.00%	US$2.5B	26.78%	N/A	N/A	N/A
JPMorgan BetaBuilders Japan ETF (BBJP)	19.00%	US$14.1B	20.08%	N/A	N/A	N/A

🎯 Why This Matters

The detailed valuation and peer comparison reveal that EWJ offers a highly liquid and widely recognized gateway to Japanese equities. While its expense ratio isn't the absolute lowest, its deep liquidity and strong alignment with its benchmark make it a compelling choice for investors prioritizing efficient access to the Japanese market over marginal cost savings from newer, smaller funds. Investors should continue to monitor Japan's economic data and corporate reforms, as these will be key determinants of future performance.

📊 Appendix

Top 10 Holdings (80+ of ETF Value)

#	Ticker	Logo	Name	Sector	Weight
1	7203	T	Toyota Motor Corp	Consumer Discretionary	4.5%
2	8306	M	Mitsubishi UFJ Financial Group Inc	Financials	4.3%
3	6501	H	Hitachi Ltd	Industrials	3.2%
4	6758	S	Sony Group Corp	Consumer Discretionary	2.9%
5	8316	S	Sumitomo Mitsui Financial Group Inc	Financials	2.7%
6	8035	T	Tokyo Electron Ltd	Technology	2.5%
7	6857	A	Advantest Corp	Technology	2.4%
8	8411	M	Mizuho Financial Group Inc	Financials	2.2%
9	9984	S	SoftBank Group Corp	Communication Services	2.2%
10	7011	M	Mitsubishi Heavy Industries Ltd	Industrials	1.9%

Fund Mechanics

How It Works

The iShares MSCI Japan ETF (EWJ) is a passively managed exchange-traded fund designed to track the performance of the MSCI Japan Index. This index represents the large and mid-capitalization segments of the Japanese equity market. The fund primarily invests in the component securities of its underlying index and in investments with substantially identical economic characteristics. Its market-cap weighting methodology ensures that companies with larger market valuations have a greater influence on the fund's performance. EWJ is renowned for providing broad, diversified exposure to Japanese equities, typically holding hundreds of individual stocks. It has been a bellwether for US-based investors seeking exposure to Japan since its launch in 1996, making it the oldest and one of the most popular options in its category.

Holdings Breakdown

Number of Holdings

181

Top 10 Concentration

2814.0%

Turnover Rate

600%

Category	Weight	Description
Financials	19.2%	Includes banks, diversified financials, and insurance companies.
Industrials	15.8%	Comprises companies in machinery, aerospace, and construction.
Consumer Discretionary	11.2%	Encompasses automotive, electronics, and retail.
Technology	10.9%	Covers electronic technology and IT services.
Health Care	6.8%	Includes pharmaceuticals and health technology.
Communication Services	5.0%	Telecommunication services and interactive media.
Other	30.0%	Remaining sectors including Process Industries, Retail Trade, Transportation, Utilities, etc.

Cost Efficiency

Expense Ratio

49.00%

Median Bid-Ask Spread

1.000%

Performance History

Year	ETF Return	Benchmark Return	Tracking Diff	Volatility	Max Drawdown	Sharpe Ratio
2021	1.56%	1.71%	0.15%	N/A	N/A	N/A
2022	-17.36%	-16.65%	-0.71%	N/A	N/A	N/A
2023	19.78%	20.32%	-0.54%	N/A	N/A	N/A
2024	6.80%	8.31%	-1.51%	N/A	N/A	N/A
2025	25.92%	24.60%	1.32%	N/A	N/A	N/A

Annualized Return Since Inception

2.38%

Detailed Peer Comparison

Ticker	Name	Issuer	Exp Ratio	AUM (B)	1Y	3Y	5Y	Yield	StdDev 3Y	Sharpe 3Y	Spread
EWJ ⭐	iShares MSCI Japan ETF	BlackRock, Inc.	49.00%	US$16.8B	25.9%	17.2%	6.2%	1.35%	11.81%	0.83	1.000%
FLJP	Franklin FTSE Japan ETF	Franklin Templeton	9.00%	US$2.5B	26.8%	N/A	N/A	N/A	N/A	N/A	N/A
BBJP	JPMorgan BetaBuilders Japan ETF	J.P. Morgan Asset Management	19.00%	US$14.1B	20.1%	N/A	N/A	N/A	N/A	N/A	N/A
Category Average			39.00%	—	25.9%	17.2%	6.2%	N/A	—	N/A	—

Risk Metrics

Beta

0.72

Standard Deviation

1 Year	3 Years	5 Years	10 Years
7.73%	11.81%	11.20%	13.44%

Sharpe Ratio

1Y	3Y	5Y	10Y
1.53	0.83	0.38	0.51

Sortino Ratio

3 Years	5 Years
1.39	1.52

Maximum Drawdown

1 Year	3 Years	5 Years	Since Inception
-1.80%	-7.03%	-28.85%	-58.36%

Correlations

S&P 500

0.34

Liquidity & Trading

Volume

Avg Daily Shares

5,959,342

Avg Daily Dollar Volume

US$504.3M

Trend

stable

Bid-Ask Spread

Metric	Value
Median (Percent)	1.000%
Median (Dollar)	US$0.01
During Hours	N/A
At Close	N/A
Volatility	low

Premium/Discount to NAV

Metric	Value
Current	-24.00%
30-Day Average	5.00%
1-Year Average	N/A
Standard Deviation	N/A
Max Premium (1Y)	77.00%
Max Discount (1Y)	-30.00%

Creation/Redemption Activity

Trend

Net outflows in the past year

Net Flows

Period	Net Flow
1 Year	US$-0.0M

⚠️ Disclaimer: This ETF research report is for informational and educational purposes only. It does not constitute investment advice, a recommendation, or an offer to buy or sell securities. EC² Invest is not a registered investment advisor. All data is sourced from public sources and may contain errors. Past performance does not guarantee future results. ETF investing involves risk, including possible loss of principal. Always conduct your own research and consult with a qualified financial professional before making investment decisions.