One of the Least Expensive Japan ETFs: JPN

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Investors seeking to diversify an equity portfolio should look to international markets to broaden their exposure, including timely Japan ETFs.

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For example, the Deutsche X-trackers Japan JPX-Nikkei 400 Equity ETF (NYSEArca: JPN), which recently lowered its annual fee to 0.09% from 0.15%, making it one of the least expensive Japan ETFs on the market, can help investors access the Japanese markets.

The JPX-Nikkei 400 Index was launched in January 2014 as a means of reinvigorating the Japanese equity market. Unlike traditional market capitalization-weighted indexing methodologies, the JPX-Nikkei 400 Index employs a rigorous screening process based on return on equity, cumulative operating profit and market capitalization to select high-quality, capital-efficient Japanese companies.

Related: 3 Japan ETFs Look Like Bargain Picks

Compared to the benchmark MSCI Japan Index, the JPX-Nikkei 400 Index is slightly less top heavy. Specifically, Toyota Motor is only 1.7% and Mitsubishi UFJ Financial is 1.3% of JPN's underlying portfolio, whereas the MSCI Japan Index takes a heftier 4.6% and 2.2% position in the two companies, respectively.

JPN is down 1.4% year-to-date and gained 15.4% over the past year.

Looking ahead, strong fundamentals may support the Japanese economy and the developed market. Japan is experiencing earnings growth driven by internal factors like growing private capital expenditure and domestic consumption, Yunyoung Lee, a portfolio manager for Janus Henderson Investors, said on Seeking Alpha.

The Bank of Japan will also likely maintain its loose monetary polices for longer, as compared to the U.S. Federal Reserve and E.U.'s European Central Bank, which have taken steps to wind down quantitative easing.

Related: ETF Investors May Want to Research Japan, Germany

Moreover, Lee argued that Japanese shareholders may benefit from increased dividend payments and share buybacks as corporate reforms are being boosted by increasingly large cash hoards.

"Overall, we think Japanese equities could deliver strong corporate earnings growth this year," Lee said.

For more information on the Japanese markets, visit our Japan category.

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