The JPN ETF (Lyxor) replicates the Topix index which is composed of 2000 Japanese stocks, so it is very deep and most representative of the Japanese economy.
The industry in all its forms (consumer goods, equipment, heavy industry, etc.) is strongly represented in the index, with a financial sector that weighs less than 15% and a health sector at around 7%. The technology is quite large and represents 11% of the index. In the top 10 holdings that represent about 15% of the Topix index we will find car manufacturers (Toyota, Honda), and groups like Mitsubishi, Softbank or Sony as well as financials.
The cumulative performance of this ETF since January 2010 is 90%, which also includes currency fluctuations Yen / Euro (Topix performance over the 101% period). At the expense level this ETF is approximately 0.45% and works by direct replication.
The Japanese economy is the third largest in the world, behind the US and China, with a GDP of around $ 5,000 billion, a highly diversified economy based on services and industry / Growth is based on exports of consumer goods (automotive, technological goods) of capital goods and infrastructure, which is somewhat reminiscent of Germany. The Japanese economy is rather dependent on the evolution of its currency with the major world currencies (dollar, Euro, Renmimbi, Sterling), while the most important problem remains the deflation that has lasted for two decades. This deflation is the result of an historically adjustment of the price of assets that had entered a bubble (1980s), but it is also due to a structural problem related to declining demography not compensated by immigration.
Japan is today the most heavily indebted country in the developed world but the national debt is held by the Japanese and not by foreign funds which limits the risks of financial crisis but which instead constrains the economic recovery. Today the context seems slightly more favorable in Japan, with signs of moderate inflation fueled by a likely rise in wages in the coming months while the unemployment rate is currently at the lowest level at 3%. However, after growth of 0.5% in Q117, GDP growth was zero in Q217, while the Yen's rise against the dollar weighed on exports.
The reassuring news from China and the deepening of the economic partnership with India are however favorable factors while the current valuations of the Japanese index are still reasonable at about 18x the profits 2017 but with a potential for high profit growth .
