WisdomTree to launch Japan ETF — with no exposure to yen

WisdomTree Investments Inc. plans to roll out a Japan small-cap exchange-traded fund that will hedge out exposure to the yen later this year. The WisdomTree Japan Hedged Small Cap Equity ETF will invest in dividend-paying Japanese small-cap companies, according to a filing with the Securities and Exchange Commission. It is similar to the $200 million WisdomTree Japan Small Cap Dividend ETF (DFJ). The big difference is that the hedged version won't have exposure to the yen. Removing the currency exposure from Japanese stocks has been an incredibly popular trade since the Bank of Japan last fall began aggressively devaluing its currency in order to stimulate growth and end deflation. The Bank of Japan doubled down on its pledge to spur inflation last week, saying that it would spend $1.4 trillion over the next two years to strengthen the economy. That left the yen trading at near 100 to the dollar for the first time in more than four years. The $6 billion WisdomTree Japan Hedged Equity ETF (DXJ) had net inflows of $4.1 billion and a return of about 40% year-to-date through Tuesday, the most of any ETF, according to IndexUniverse LLC. The $7.65 billion iShares MSCI Japan ETF (EWJ), which includes exposure to the yen, was up just 22% over the same time. The WisdomTree Japan Small Dividend ETF was up 16% is up since mid-November. WisdomTree spokesman Stuart Bell didn't immediately return calls seeking comment.