Japanese equities have quietly staged one of the most interesting leadership shifts of 2025—and we find that most U.S. investors aren't even looking in that direction. For years, the conversation around Japan has been dominated by macro worries, currency noise and a sense that the market "just can't break out." Yet the numbers now tell a completely different story.

Throughout 2025, we have written numerous times about Warren Buffett's favorable views on five particular Japanese equity holdings in Berkshire Hathaway's portfolio.¹ In early November 2025, he filed for another yen bond issuance, indicating a desire to increase his currency hedge or put more capital to work buying more Japanese stocks.²

We noticed recently that the WisdomTree Japan Hedged Equity Fund (DXJ)³ is beginning to separate itself from the iShares MSCI Japan ETF (EWJ).⁴ With the yen weakening and fundamentals finally showing momentum, the question isn't "Why own Japan?" anymore. It's "Why not own the version of Japan that's showing the performance acceleration?"

Looking at figures 1a and 1b:

• As of December 1, 2025, DXJ has overtakenEWJ—flipping the dynamic that had been in place for most of 2025. With the yen weakening, particularly on the one- and three-month time horizons, as shown through the negative performance of the Invesco CurrencyShares Japanese Yen Trust (FXY),⁵ and global investors favoring U.S. dollar strength, as seen in the slightly negative to positive returns of the Invesco DB US Dollar Bullish Fund (UUP),⁶ the hedged structure is now neutralizing any weakness in the yen, unlocking equity momentum.
• Short-term performance momentum is decisively in DXJ's favor. In a global market where investors are starved for clean, directional stories, the combination of Japanese corporate reform, buybacks and a currency tailwind is giving DXJ a sharper edge in real time.
• The SPY comparison highlights what's hiding in plain sight. Whether looking at year-to-date, one-year, three-year or five-year returns, DXJ has exceeded the S&P 500's performance—a powerful narrative when advisors have recently tended to assume U.S. large caps are the only game in town. If you love the S&P 500 Index trend in U.S. equities, we think you should love what DXJ is doing, because it's capturing similar factors with an overlooked valuation and policy backdrop. We recognize that in the latter part of 2025, concerns about the "AI trade" have dominated U.S. equity sentiment. Japanese equities offer an opportunity to steer around that.

Figure 1a: DXJ's Performance Has Been Accelerating

Figure 1b: Standardized Returns as of September 30, 2025

Conclusion: It Could Be a Great Time to Look at Japan

Japanese equities remain a psychological anomaly in global investing. The same advisors who eagerly buy every dip in U.S. large caps suddenly turn cautious, contemplative, even philosophical when Japan enters the conversation. In our experience, investors approach Japan as though it requires a dissertation to justify. The irony is that the case for Japan today is simpler than ever: corporate governance improving, currency weakness acting as a tailwind—not a risk—and performance numbers that stand shoulder-to-shoulder with America's market darlings. In a market where it seems like every other headline about U.S. equities discusses some form of AI or valuation risk, Japanese equities are showing performance and offering a way to navigate around these issues.

Figure 2: Additional Information

¹ Source: W. E. Buffett, "Letter to shareholders" [annual letter], Berkshire Hathaway Inc., 2/22/25.

² Source: "Berkshire Hathaway plans yen bond amid global debt binge," Bloomberg News, 11/6/25.

³ DXJ is designed to track the total return performance, before fees and expenses, of the WisdomTree Japan Hedged Equity Index. This Index neutralizes any performance of the yen vs. U.S. dollar exchange rate, and it focuses the equity exposure on dividend-paying, export-oriented stocks of Japan. Constituents are weighted on the basis of cash dividends paid.

⁴ EWJ is designed to track the total return performance, before fees and expenses, of the MSCI Japan Index. This is one of the most widely followed equity performance benchmarks for Japanese equities, with constituents representing large- and mid-cap stocks of Japan, weighted by free float-adjusted market capitalization.

⁵ FXY represents an ETF, the most widely followed investment vehicle in the U.S., which seeks to track the performance of the Japanese yen versus the U.S. dollar.

⁶ UUP represents an ETF, the most widely followed investment vehicle in the U.S., which seeks to track the performance of the U.S. dollar against a basket of other currencies.