Weakened Yen Fuels Japanese Stock Market Surge

The Japanese yen has been weakening against major world currencies for years, hitting a 40-year low in July. The Bank of Japan's decision to keep its benchmark interest rate low has led global capital to flow into countries with higher interest rates, causing the yen to drop.

Despite this, Japan's stock market is performing well, up about 19% so far in 2026, outpacing the S&P 500 index. The iShares MSCI Japan Index Fund (EWJ) has led the way, with several sectors driving growth including technology, financials, basic materials, and industrials.

Japan's economy is an exporting powerhouse, with companies like Toyota Motor, Hitachi, and Sony Group benefiting from a weaker yen. The country's GDP of about $4.4 trillion makes it the world's fourth largest economy, behind only the U.S., China, and Germany.

While there are risks to Japan's economy, including energy dependence on the Middle East region, experts believe Japanese stocks are worth considering, with the iShares MSCI Japan Index ETF being a great way to gain exposure to the entire market.