---
title: "Hedged Japan funds rose 0.7% as the yen fell; VGK dropped 1.8%"
url: "https://etf.net/news/hedged-japan-funds-rose-0-7-as-the-yen-fell-vgk-dropped-1-8-2026-09-20"
published_at: "2026-09-20T16:45:35.055Z"
updated_at: "2026-09-20T16:45:35.055Z"
byline: "ETF.net Research"
---

# Hedged Japan funds rose 0.7% as the yen fell; VGK dropped 1.8%

Week through Friday, September 18, 2026: yen-hedged DXJ returned 0.70% while unhedged EWJ fell 1.58% and Europe's VGK fell 1.77%, as the yen declined 2.0%.

By ETF.net Research. Published Sep 20, 2026.

The Federal Reserve on Wednesday, September 16, raised its funds-rate target by a quarter point to 3.75%–4.00%, its first increase since 2023. On Friday the Bank of Japan, by a 7-2 vote, said it would guide the uncollateralized overnight call rate to around **1.25%**, effective September 24. Invesco CurrencyShares Japanese Yen Trust FXY, which holds yen, fell **2.01%** through Friday's New York close, September 18. The federal funds target still sits **2.50 to 2.75 percentage points** above the Bank of Japan's call-rate guideline.

The Nikkei 225 rose **1.57%** last week in yen, from 64,011.34 to 65,018.95. A dollar holder of Japanese stocks did not receive that week. The iShares MSCI Japan ETF EWJ, which holds Japanese shares and leaves the yen unhedged, fell **1.58%**.

The funds that strip the yen out of the return went the other way. WisdomTree Japan Hedged Equity DXJ rose **0.70%**. iShares Currency Hedged MSCI Japan HEWJ rose **0.67%**. The gap between DXJ and EWJ was **2.3 percentage points**, and it was the currency.

Chart: Yen-hedged DXJ finished above 100; EWJ and FXY did not

[Last week the yen did the opposite](https://etf.net/news/unhedged-japan-funds-rose-0-3-on-the-yen-vgk-fell-1-9-after-the-ecb-hike-2026-09-13): unhedged Japan funds finished higher even as Tokyo's local index fell.

## The hedge flipped the sign; DXJ is not the Nikkei

Hedging did not invent a different stock market. It removed a currency that was moving against the dollar. DXJ still trails the Nikkei's local **1.57%** because it is not the Nikkei: it tracks dividend-paying Japanese companies that derive less than 80% of their revenue from Japan, then hedges the yen. The hedge is what flipped the sign.

## VGK fell 1.77% as the euro slipped to $1.1460

European stocks fell in local currency, then lost more in dollars. The STOXX Europe 600 dropped **0.57%** in euros, from 639.10 to 635.45. The Vanguard FTSE Europe ETF VGK, which holds developed European stocks and leaves the currencies unhedged, returned **-1.77%**. Most of that extra gap was the euro: the ECB's dollar reference rate moved from $1.1592 on September 11 to $1.1460 on September 18, a **1.14%** decline. Invesco CurrencyShares Euro Trust FXE, which holds euros, fell 0.95%.

The eurozone pair isolates the hedge. iShares MSCI Eurozone EZU fell **2.08%**; iShares Currency Hedged MSCI Eurozone HEZU fell **0.88%**. Hedging saved **1.2 percentage points**, in line with the euro's own week.

London showed the same currency hit without a falling stock market. The FTSE 100 rose **0.08%**, from 10,650.44 to 10,659.13, and iShares MSCI United Kingdom EWU still fell **1.40%**. Invesco CurrencyShares British Pound Sterling Trust FXB fell 0.95%. The CAC 40 dropped 1.40%, from 8,179.77 to 8,065.02; iShares MSCI France EWQ fell **2.72%**.

VGK went ex-dividend on Friday, **$0.2224** a share, payable September 22. The price fell 2.01%; the total return of **-1.77%** is what a holder earned. Over one month the fund is down **4.12%**.

The broad developed-ex-US wrappers sat between the two poles and inherited both currencies. Vanguard FTSE Developed Markets VEA returned **-1.56%**. iShares MSCI EAFE EFA fell 1.62%. iShares Currency Hedged MSCI EAFE HEFA fell **0.34%**. Xtrackers MSCI EAFE Hedged Equity DBEF fell 0.47%. Hedging the EAFE book saved about **1.3 percentage points**.

Chart: Hedged funds beat unhedged twins in all three books

Yen-hedged Japan funds were the only equities that finished the week higher. Unhedged Europe and Japan funds fell together in dollars.

Table: Exposure, Fund, Week, YTD

The year has not flipped with the week. EWJ is still up **20.8%** for 2026; DXJ is up 24.6%. VGK is up 7.7%, and the eurozone hedge, HEZU, leads its unhedged twin by 4.2 percentage points. VEA is up **15.4%**, between those Japan and Europe results: Japan is its largest country weight, **20.9%** as of August 31, and it also holds Canada, Korea, and the rest of Europe. FXY is now down 0.32% year to date: September's yen bounce, the whole of [last week's column](https://etf.net/news/unhedged-japan-funds-rose-0-3-on-the-yen-vgk-fell-1-9-after-the-ecb-hike-2026-09-13), is gone. The hedge that paid last week on a rising yen paid this week on a falling one. That is the product, not a verdict on Tokyo.

Source: etf.net, https://etf.net/news/hedged-japan-funds-rose-0-7-as-the-yen-fell-vgk-dropped-1-8-2026-09-20. Please cite the page URL.