Japanese shares have continued to deliver gains in 2025, beating highs recorded 35 years ago, and some analysts believe the outlook for the country’s stock market remains relatively positive. 

• The Tokyo Stock Price Index (TOPIX) gained 11% in the third quarter to rank among the best performing global markets. Its year-to-date gain was 15.3% on 30 September, again putting it among the top performers.
• The Japanese market pushed higher still in the first week of October after the country’s ruling Liberal Democratic Party named Sanae Takaichi – known for her pro-business policies – as its new leader and likely next Prime Minister.

Behind the gains: Ongoing gains in Japanese shares are the result of several factors. A US-Japan trade deal cut US tariffs on almost all Japanese exports from 25% to 15%. Previous corporate governance reforms have also encouraged greater transparency and a stronger focus on shareholder returns among Japanese companies. 

• Meanwhile, the Japanese economy is growing, and some economists expect that growth to continue over the next couple of years. Inflation has finally risen – but not at a rate high enough to impact consumer or market confidence. The weak Yen has also made Japanese assets cheaper for global investors to purchase.
• Some analysts argue that the Japanese market rise could continue as a result of the continuation of the above factors alongside other tailwinds such as the AI boom. Others have cut overweight allocations in global portfolios to neutral, even if simply to take profits.

ETF options: Two ETFs available in Australia allows advisers to build a specific exposure to the Japanese equities in client portfolios. 

• The iShares MSCI Japan ETF (ASX: IJP) is the largest and tracks the MSCI Japan Index, which measures the performance of Japanese large and mid-capitalisation companies. It had a total of one year return of 19.77% as of 30 September 2025, and its largest weightings on 3 October 2025 were in industrials (23.97% of its portfolio), consumer discretionary stocks (17.23%), and financials (16.45%). 
• The other option is the Betashares Japan Currency Hedged ETF (ASX: HJPN). It instead tracks the S&P Japan Exporters Hedged AUD Index, which provides diversified exposure to the largest globally competitive Japanese companies (hedged into Australian Dollars). It produced a 14.4% gain in the year to 29 August and its top holdings on 6 October were; Toyota Motor Corporation, Mitsubishi UFJ Financial Group, and Sony Group.

Otherwise, an investment in a broader global ETF would also include an allocation to the Japanese market. Japan accounts for the second highest regional exposure in Vanguard’s MSCI International Shares ETF (ASX: VGF) at 5.6%, after only the US (73.4%) on 31 August.

To find out more about how to optimise your ETF trade execution, contact your Account Manager or a member of our Business Development team.