EWJ Trailed Currency-Hedged HEWJ by $21,150 in 12 Months
A hypothetical $300,000 investment in the unhedged iShares MSCI Japan ETF returned 15.5% over the 12 months to November 3, 2026, compared with 22.55% for its currency-hedged counterpart. The $21,150 gap reflected the yen’s decline, along with differences in fees and hedging costs. The comparison shows how exchange rates can shape returns from international funds.
EWJ holders trailed currency-hedged HEWJ by $21,150 on a hypothetical $300,000 investment over the 12 months ending November 3, 2026, as the yen weakened against the dollar. Both Japan-focused exchange-traded funds gained, but the currency exposure changed what investors kept.
The iShares MSCI Japan ETF (EWJ) returned 15.5%, including distributions, growing the hypothetical investment to roughly $346,500. The iShares Currency Hedged MSCI Japan ETF (HEWJ) returned 22.55%, ending near $367,650. The comparison concerns returns over that period, not a guaranteed result for future investors.
Currency mattered. EWJ tracks Japanese stocks priced in yen, so holders also bear the effect of exchange-rate movements when measuring returns in dollars. HEWJ holds EWJ and uses currency contracts to hedge yen fluctuations.
Why did EWJ holders trail the currency-hedged fund?
The yen weakened during the measured period, reducing the dollar value of returns from an unhedged fund. Currency drove most of the gap, while fees and hedging costs also contributed, according to the funds’ reported figures.
A dollar bought 154.21 yen on November 3, 2025, and 158.66 yen on November 3, 2026, about 2.9% more. The dollar’s value against the yen ranged from 152.08 yen on January 27, 2026, to 163.94 yen on July 28, 2026.
The funds’ holdings provide a close comparison of the currency effect. HEWJ’s holdings report dated August 31, 2026, showed 99.98% of its net assets in EWJ itself, alongside yen and U.S. dollar currency contracts. Since the stock basket matches, much of the difference in performance reflects the hedge and its costs rather than a different portfolio of Japanese shares.
The consequences reach investors who choose an international fund for its stock exposure but do not account for currency. A weakening yen can lower dollar returns even when the underlying Japanese shares rise; a stronger yen can instead benefit unhedged EWJ holders. The hedge changes that trade-off, rather than removing every cost.
Not a fixed advantage.
EWJ charges a 0.49% expense ratio, equal to $49 a year per $10,000 invested. On a hypothetical $300,000, that would be $1,470 a year. HEWJ’s currency protection can also involve costs, including expenses from rolling currency contracts, so the period’s return gap should not be read as a permanent advantage for the hedged fund.
EWJ held roughly $22.7 billion in net assets as of August 31, 2026, compared with about $774 million for HEWJ. Those figures show the difference in fund size, while the return comparison shows that currency decisions can materially affect an investor’s result.
A third fund offers a separate point of comparison. The WisdomTree Japan Hedged Equity Fund (DXJ) returned 31.72% over the same window. A hypothetical $300,000 in EWJ trailed DXJ by $48,660, but DXJ follows a different index and holds different stocks, so its performance reflects stock selection as well as currency hedging. Its expense ratio was 0.48%, or $48 per $10,000 a year, according to its July 31, 2026 prospectus.
For investors comparing international funds, the distinction is whether returns should track both Japanese shares and the yen-dollar exchange rate, or whether the fund should hedge the currency exposure. Over the measured 12 months, the hypothetical EWJ investment ended $21,150 below HEWJ.
