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I rate the Franklin FTSE Japan Hedged ETF (FLJH) a buy, citing diversified holdings and effective yen risk mitigation. FLJH offers exposure to over 400 Japanese large- and mid-cap stocks, with a weighted average upside potential of 21.5% and a 1.7% dividend yield. Market reforms and Japan's pivotal role in the global AI/data center supply chain support EPS growth and valuation upside.
The Franklin FTSE Japan Hedged ETF (FLJH) is positioned amid shifting Japanese macroeconomic and market dynamics. The Bank of Japan has trimmed its 2026 growth target to 0.5% while raising inflation expectations. Japan's energy mix and reliance on Middle Eastern oil remain key macro factors influencing the investment landscape.
International stocks trounced U.S. stocks in 2025, and valuations are now miles apart between the U.S. and other markets.
Franklin FTSE Japan Hedged ETF offers broad Japanese exposure, focusing on industrials, automotive, and financials, while hedging Yen risk. Potential US tariffs on EU autos could incrementally benefit Japanese exporters, but these would be coming from the uncertain Greenland tariff threats and supposedly in June. FLJH's significant financial exposure is problematic, though, amid Japan's fiscal-monetary policy conflict reflected in fiscal concerns in rising long-term bond yields.
Berkshire's higher stakes in Mitsubishi and Mitsui spark a rally in Japan's trading houses. ETFs like FJP, EWJV, DFJ, SCJ, FLJH are likely to benefit.
The Franklin FTSE Japan Hedged ETF, which covers around 500 Japanese stocks and aims to mitigate Yen currency risk, has underperformed developed markets this year. We see how FLJH stacks up against the largest currency hedged Japanese themed ETF- DXJ. We examine if current conditions are supportive for a long position in FLJH.
As the global private equity industry took tentative steps toward recovery in 2024, Japan raced ahead. The value of private equity investment in Japan jumped nearly 41% over the prior-year total in 2024, far outpacing the 25% year-over-year gain in global private equity deal value, according to S&P Global Market Intelligence data.
The “real” policy rate is massively negative, with the new policy rate of 0.25% far below Core CPI of 2.6%. When QT reaches about ¥3 trillion per month in 2026, it would represent a reduction of its JGB holdings of about 0.5% per month.