Key Takeaways
- • A hypothetical $300,000 invested in the iShares MSCI Japan ETF (EWJ) grew to roughly $346,500 between November 3, 2025 and November 3, 2026, a 15.5% return including distributions, while the currency-hedged iShares Currency Hedged MSCI Japan ETF (HEWJ) ended near $367,650, a 22.55% return, a $21,150 gap.
- • The gap is attributed largely to currency: the yen weakened about 2.9% against the dollar over the window (from 154.21 to 158.66 yen per dollar), and HEWJ's yen hedge captured that move, while EWJ holders were unhedged.
- • HEWJ holds 99.98% of its net assets in EWJ itself plus yen and U.S. dollar currency contracts, so the stock exposure is nearly identical and the comparison isolates much of the currency effect, according to the fund's August 31, 2026 holdings report.
- • EWJ's 0.49% expense ratio amounts to about $1,470 a year on $300,000, a figure far smaller than the currency-driven gap, which does not appear in fee tables.
- • The hedge result could reverse if the yen strengthens; EWJ held roughly $22.7 billion in net assets as of August 31, 2026, versus about $774 million for HEWJ.
Summary
Between November 3, 2025 and November 3, 2026, Japanese equities delivered a strong year for U.S.-listed investors, but the currency exposure embedded in one popular Japan ETF meaningfully affected returns. According to the analysis, a hypothetical $300,000 in the iShares MSCI Japan ETF (NYSEARCA:EWJ) returned 15.5% including distributions, growing to roughly $346,500. The same amount in the iShares Currency Hedged MSCI Japan ETF (NYSEARCA:HEWJ) returned 22.55%, ending near $367,650.
HEWJ's holdings report dated August 31, 2026 shows 99.98% of its net assets invested in EWJ, combined with yen and U.S. dollar currency contracts that hedge the yen. Because the underlying stock basket is effectively the same, the comparison isolates much of the currency effect, which the source identifies as the main driver of the gap, alongside differences in fees and hedging costs. EWJ tracks the MSCI Japan Index and carries a 0.49% expense ratio, or about $1,470 a year on $300,000, a cost the source describes as small relative to the gap.
The yen weakened over the measured period. A dollar bought 154.21 yen on November 3, 2025 and 158.66 yen on November 3, 2026, about 2.9% more, with an intra-period range from 152.08 yen on January 27, 2026 to 163.94 yen on July 28, 2026. The source notes that currency forwards also incorporate the interest-rate differential between the two countries, which can add to a yen-hedged fund's return when U.S. rates exceed Japanese rates. The effect cuts both ways: if the yen strengthens, unhedged EWJ holders benefit and HEWJ holders forgo that gain, and HEWJ also bears the cost of rolling its currency contracts. Net assets stood at roughly $22.7 billion for EWJ and about $774 million for HEWJ as of August 31, 2026.
The WisdomTree Japan Hedged Equity Fund (NYSEARCA:DXJ) returned 31.72% over the same window, leaving EWJ $48,660 behind on the hypothetical $300,000. The source cautions that DXJ tracks a different index with different holdings, so much of that lead reflects stock selection rather than the hedge alone. DXJ's expense ratio is 0.48% per its July 31, 2026 prospectus.
The analysis concludes that investors buying international funds should check whether a fund hedges currency and decide deliberately whether they want Japan returns tied to the yen-dollar rate or only to Japanese equities.
HEWJ's holdings report dated August 31, 2026 shows 99.98% of its net assets invested in EWJ, combined with yen and U.S. dollar currency contracts that hedge the yen. Because the underlying stock basket is effectively the same, the comparison isolates much of the currency effect, which the source identifies as the main driver of the gap, alongside differences in fees and hedging costs. EWJ tracks the MSCI Japan Index and carries a 0.49% expense ratio, or about $1,470 a year on $300,000, a cost the source describes as small relative to the gap.
The yen weakened over the measured period. A dollar bought 154.21 yen on November 3, 2025 and 158.66 yen on November 3, 2026, about 2.9% more, with an intra-period range from 152.08 yen on January 27, 2026 to 163.94 yen on July 28, 2026. The source notes that currency forwards also incorporate the interest-rate differential between the two countries, which can add to a yen-hedged fund's return when U.S. rates exceed Japanese rates. The effect cuts both ways: if the yen strengthens, unhedged EWJ holders benefit and HEWJ holders forgo that gain, and HEWJ also bears the cost of rolling its currency contracts. Net assets stood at roughly $22.7 billion for EWJ and about $774 million for HEWJ as of August 31, 2026.
The WisdomTree Japan Hedged Equity Fund (NYSEARCA:DXJ) returned 31.72% over the same window, leaving EWJ $48,660 behind on the hypothetical $300,000. The source cautions that DXJ tracks a different index with different holdings, so much of that lead reflects stock selection rather than the hedge alone. DXJ's expense ratio is 0.48% per its July 31, 2026 prospectus.
The analysis concludes that investors buying international funds should check whether a fund hedges currency and decide deliberately whether they want Japan returns tied to the yen-dollar rate or only to Japanese equities.
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