3 Top Japan ETFs To Surge Higher In 2H

After a lackluster 2014, Japanese stocks have been on a tear this year buoyed by cheap massive money flows, rising corporate profits, corporate governance improvements and higher exports. Additionally, "Abenomics" has once again started to fuel growth in the Japanese economy.

Notably, the Nikkei 225 index rallied to the highest level in more than 18 years on Tuesday, returning nearly 20% in the year-to-date timeframe. It broke the 20,000 level for the first time in 15 years in late April. Though the index retreated from its peak in the past two trading sessions on the Greek impasse and profit booking activity, the bull run is likely to continue in the coming months given the recovering economic fundamentals (read:Nikkei Hits fresh 15-Year High: 3 Japan ETFs to Buy).

Bright Spots

The world's third-largest economy gained strong momentum in the first quarter with higher-than-expected growth. The economy grew 3.9% annually, up from preliminary reading of 2.4% thanks to the pickup in business investments, consumer spending and a higher inventory buildup.

At its latest monetary policy meeting, the Bank of Japan (BOJ) maintained its massive pace of asset purchase at 80 trillion yen per year to spur inflation and economic growth. However, lower oil prices are weighing on the country’s inflation, which has fallen to zero and is far from the BOJ target of 2%. Lower inflation could open up the doors for further policy easing later in the year that could drive up stocks.

Apart from these, Japan is primarily an export-oriented economy and a weaker currency makes its exports more competitive, prompting a rally in the stock market. But the most recent multi-year gains in the stocks came despite the fact that yen has shown some respite against the U.S. dollar in recent sessions after faltering to a twelve-and-half year low early this month, solidifying confidence in economic recovery.

Further, the Japanese stocks seem inexpensive at the current levels even after an astounding rally, as the stock market index is still well below the record high of 38,900 plus reached during the real estate bubble in 1989 (read: 4 Strong Reasons to Buy Japan ETFs Now).

Given that Japan is on the mend, investors seeking to participate in the recovery should definitely tap the currently beaten down stock price arising from the Greece uncertainty. For those, a focus on the top-ranked Japan ETFs could be a less risky way to tap the same broad trends.

How to Play?

While there are many ETFs that have top Zacks ETF Ranks of 1 (Strong Buy) or 2 (Buy) and are expected to outperform in the months to come, the funds that were promoted in the latest ranking upgrade could make for an ideal choice moving into the third quarter. This is because a number of factors such as the latest industry outlook, expert surveys, and ETF-specific factors helped in the spike seen by these ETFs (read: all the Top Ranked ETFs).

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