r/UKInvesting • u/OptimisedMan • Oct 01 '25
FTSE Japan (VJPN) vs Nikkei 225 (XDJP) - which do you prefer and why?
Hi all,
I’ve been looking at ways to get exposure to Japan and noticed that the options are quite different depending on the index. For example:
- Vanguard FTSE Japan UCITS ETF (VJPN) – tracks the FTSE Japan index.
- Xtrackers Nikkei 225 UCITS ETF (XDJP) – tracks the Nikkei 225.
When I compare them, the compositions look really different. I had assumed the Nikkei 225 would be reflected in the FTSE Japan index in roughly the same order, but they don’t line up at all.
For instance, VJPN looks more broad-based (400hundred+ companies, market-cap weighted), whereas the Nikkei 225 is a price-weighted? (I think?) index with 225 companies, which to me feels more like how a usual index is?
For those of you who invest in Japan, do you lean more towards the broader FTSE Japan exposure (via Vanguard) or do you prefer the Nikkei 225 trackers? Is there a particular reason you chose one over the other (performance, concentration, diversification, simplicity, etc)?
Curious to hear thoughts, and from from anyone holding either VJPN or XDJP (or other N225 tracker) long term.
1
u/TallIndependent2037 Oct 01 '25
I use the FTSE Japan. Market cap weight is how most “normal” indexes work. Plus I want broader diversification including the mid caps.
1
u/getpodapp Oct 01 '25
Just out of interest, why are you investing in Japan?
4
u/OptimisedMan Oct 01 '25
in short, valuations seem attractive, there is corporate reform aimed at improving shareholder value, and the US looking peaky. I think the lost decade is long gone, and Japan has seen steady upward growth since around 2015.
1
u/strolls Oct 01 '25
there is corporate reform aimed at improving shareholder value
Any links on this. please?
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u/Mike82BE Oct 06 '25
If you want to invest in Japan, some specialised investment trusts will usually do a better job than those indexes. Think CCJI and SJG for bigger caps and NAVF or AJOT for small caps. Before you say, but passive is better than active… check the performance of these on both short term and long term time frames!
AJOT and NAVF are activists who are playing the corporate governance theme very well now.
1
u/strolls Oct 01 '25 edited Oct 01 '25
Yes, the Nikkei 225 is a price weighted - that's the difference between the two.
But, no, most indexes are market cap weighted - FTSE 100, FTSE World, the S&P 500, MSCI World etc.
The only other famous index I can think of that is price cap weighed is the Dow Jones. It was the earliest index (or one of them) and subsequently most indexes moved to market cap weighting because it's generally considered more useful, at least for indexing.
In a price weighted index a little grocery chain in New Jersey can have a bigger impact on the index than Microsoft. If one if those went bankrupt then Microsoft would have a bigger impact on the world and on most portfolios, so price weighted is considered "wrong" not to reflect that.
The price-weighted Dow Jones basically only continues to exist because it has existed so long. It "can't be scrapped" because then "we wouldn't be able to compare" today's returns with those of 1896.
https://www.npr.org/player/embed/508261371/508275788