S&P 500 vs Japan
SPY closed near $708 in mid-April 2026; EWJ traded near $80-82 the same week. EWJ tracks MSCI Japan Index, holding 200+ Japanese large- and mid-cap equities.
Also known as: S&P 500 ETF (SPY) (ETF_SPY, S&P 500, SPX, SP500) · Japan / Nikkei (EWJ) (ETF_EWJ, Nikkei, Japan, N225)
Why This Comparison Matters
SPY closed near $708 in mid-April 2026; EWJ traded near $80-82 the same week. EWJ tracks MSCI Japan Index, holding 200+ Japanese large- and mid-cap equities. Year-to-date 2026, EWJ gained 7 percent through March 10 versus SPY 4.42 percent. Trailing 12 months: EWJ +31.7 percent vs SPY +17 percent (14.7 percentage point EWJ outperformance). The Japanese equity rally reflects a once-in-a-generation shift: Tokyo Stock Exchange reforms requiring profitability improvements, Japanese corporations unwinding decades of cash hoarding through buybacks and dividends, BoJ exit from negative rates, and yen weakness boosting Japanese exporters. Nikkei 225 reached approximately 42,000 in early 2026, multi-decade highs. EWJ pulled in $1 billion in a single week in late February 2026 as investors diversified from US equities.
EWJ Composition
EWJ tracks MSCI Japan Index covering 200+ Japanese large- and mid-cap equities. Country: 100 percent Japan. Top holdings April 2026: Toyota Motor ~5 percent, Sony Group ~3 percent, Mitsubishi UFJ Financial ~3 percent, Tokyo Electron ~2.5 percent, Hitachi ~2.5 percent, Sumitomo Mitsui Financial ~2 percent, Recruit Holdings ~2 percent, Keyence ~2 percent, Fast Retailing ~2 percent, ITOCHU ~2 percent.
Sector weights: Industrials ~20 percent, Consumer Discretionary ~17 percent (Toyota, Sony), Financials ~13 percent (Mitsubishi UFJ, Sumitomo Mitsui), Tech ~13 percent (Sony semiconductors, Tokyo Electron, Keyence), Healthcare ~10 percent (Daiichi Sankyo, Takeda), Consumer Staples ~7 percent, Materials ~7 percent, Communications ~6 percent.
EWJ AUM approximately $14 billion. Expense ratio 0.50 percent. The fund is unhedged: USD investors bear full JPY currency exposure. EWJ vs DXJ (yen-hedged Japan) comparison is a separate hedging-decision trade where currency view matters.
The Tokyo Stock Exchange Reform Story
The Tokyo Stock Exchange (TSE) launched a multi-year corporate governance reform program in 2023 that has been the central driver of Japanese equity outperformance. The TSE pushed companies trading below 1.0x price-to-book to either improve capital efficiency (raise ROE through buybacks, asset sales, dividend increases) or risk delisting from prime market segment.
Results through 2025-2026: Japanese share buybacks reached approximately 12 trillion yen ($82 billion) in 2024, up 60 percent from 2022. Dividend payments increased 25 percent over same period. Cash on Japanese corporate balance sheets declined from 60 percent of market cap to ~50 percent through repatriation to shareholders. Japanese ROE rose from 8.5 percent in 2022 to 10.5 percent in 2025.
The reform is structural, not cyclical. TSE continues monitoring P/B ratios and pushing reluctant companies. Major holdings like Toyota, Sony, and Mitsubishi UFJ have all announced major capital return programs. The 2026-2030 outlook continues the reform trajectory.
The BoJ Exit from Negative Rates
Conditional Forward Response (Tail Events)
How Japan / Nikkei (EWJ) has historically behaved in the 5 sessions following a top-decile or bottom-decile daily move in S&P 500 ETF (SPY). Computed from 1,285 aligned daily observations ending .
Following these triggers, Japan / Nikkei (EWJ) rises 0.16% on average over the next 5 sessions, versus an unconditional baseline of +0.15%. 129 qualifying events; Japan / Nikkei (EWJ) closed positive in 55% of them.
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Frequently Asked Questions
What's in EWJ?+
EWJ tracks MSCI Japan Index: 200+ Japanese large- and mid-cap equities. Top holdings April 2026: Toyota Motor ~5%, Sony Group ~3%, Mitsubishi UFJ Financial ~3%, Tokyo Electron ~2.5%, Hitachi ~2.5%, Sumitomo Mitsui ~2%, Recruit Holdings ~2%, Keyence ~2%, Fast Retailing ~2%, ITOCHU ~2%. Sectors: Industrials ~20%, Consumer Discretionary ~17%, Financials ~13%, Tech ~13%, Healthcare ~10%, Staples ~7%, Materials ~7%, Communications ~6%. EWJ AUM ~$14B, expense 0.50%. Unhedged: USD investors bear full JPY exposure. DXJ is the yen-hedged alternative.
What is the Tokyo Stock Exchange reform?+
TSE launched multi-year corporate governance reform in 2023 pushing companies trading below 1.0x P/B to improve capital efficiency or risk delisting from prime market segment. Results through 2025-2026: Japanese share buybacks ~12 trillion yen ($82 billion) in 2024 (+60% from 2022). Dividend payments +25% over same period. Cash on Japanese corporate balance sheets declined from 60% to ~50% of market cap through repatriation to shareholders. Japanese ROE rose from 8.5% in 2022 to 10.5% in 2025. The reform is structural not cyclical: TSE continues monitoring P/B ratios. Toyota, Sony, MUFG all announced major capital return programs.
What did the BoJ rate hike change?+
BoJ exited negative interest rates in March 2024 (first hike in 17 years) ending a decade-long unconventional monetary policy era. Subsequent hikes through 2024-2026 took policy rate from 0.0% to 0.75% (0.25% July 2024, 0.50% January 2025, 0.75% October 2025; held at 0.75% on April 28, 2026, the highest level since 1995). The exit fundamentally changed Japanese banking economics. Mitsubishi UFJ, Sumitomo Mitsui, Mizuho (combined ~10% of EWJ) benefited massively. Net interest margins expanded from 0.8% to 1.2% through cycle. Japanese bank stocks rallied 50-80% over 2024-2026. The normalization also affects yen dynamics: USDJPY peaked at 162 mid-2024 and trades around 158-160 in April 2026, still near multi-decade lows on the persistent Fed-BoJ differential.
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