Japanese ETFs to Buy as Nikkei 225 Crosses New Record High

Core Insights - The Japanese equity market is experiencing significant momentum, with the Nikkei 225 reaching a historic high of 59,000 on February 25, 2026, driven by renewed optimism in Japan's economy and corporate sector [1][3]. Factors Driving the Rally - The "Takaichi trade," named after Prime Minister Sanae Takaichi, is a primary catalyst for the rally, as her nominations to the Bank of Japan's policy board suggest a continuation of accommodative monetary policies [3][4]. - The appointments of Ayano Sato and Toichiro Asada are expected to support growth-oriented policies, including lower interest rates and sustained stimulus [3]. - A tech-led rally in the U.S. market, particularly following strong earnings from NVIDIA, has positively influenced sentiment in Japan's tech sector, contributing to the rise of the Nikkei [5][6]. Market Outlook - The outlook for Japanese equities is bullish, with J.P. Morgan Global Research indicating that Takaichi's economic policies and corporate reforms will likely drive growth in 2026 [7]. - Morgan Stanley analysts also foresee significant upside potential for Japan's equity market, emphasizing the administration's push for companies to reduce excess cash holdings, which could enhance return on equity (ROE) [8]. ETFs to Consider - Investors are encouraged to consider broad-based ETFs to gain exposure to the Japanese equity market, as they provide diversification across sectors while mitigating risks associated with individual stocks [9]. - Notable ETFs include: - iShares MSCI Japan ETF (EWJ): Net assets of $20.12 billion, up 14.5% YTD, with a fee of 49 bps [12][13]. - JPMorgan BetaBuilders Japan ETF (BBJP): Net assets of $16.07 billion, also up 14.5% YTD, with a fee of 19 bps [14]. - Franklin FTSE Japan ETF (FLJP): Net assets of $3.17 billion, up 14.9% YTD, with a fee of 9 bps [15]. - WisdomTree Japan Opportunities Fund (OPPJ): Net assets of $225.7 million, up 24.1% over the past year, with a fee of 58 bps [16].