ETFs that track American indices are generally very succesful at doing so. An example is Spy5, which has followed S&P 500 very closely since its inception in 2012.

However, any ETF I have found that track the Japanese market lag their respective index significantly in recent years. One example is the Xtrackers Nikkei 225 UCITS ETF, which has "only" increased by 45% in the previous 5 years, compared to the 85% of Nikkei 225 that the ETF is supposed to track.

So my question is, why is it difficult to replicate an index in the Japanese market? Does it have to do with conversions between the Yen and the Euro/USD?


2 Answers 2


Yes, the ETF return you quoted is in euros, whereas the Nikkei 225 index is denominated in yen. The yen has depreciated substantially against the euro over the last 5 years. Thus, the ETF gives a similar result as if you had converted euros to yen 5 years ago, bought the Nikkei 225 stocks, and now sold them and converted the yen back to euros.

  • That does not seem to add up though. 5 years ago, you got 12230 yen per 100 euros, and in the same time frame the Nikkei 225 is up 85%. So if we had bought yen for 100 euros and put them in Nikkei 225, we would have 12230*1.85 = 22630 yen today. But that is equivalent to 134 euros. So the ETF should only be up 34%, when in reality it is up 45%.
    – Manó
    Commented Jun 10 at 12:36
  • 15
    @Manó the math isn't that simple - ETFs have to buy and sell stock all the time to account for new investment, so it might have bought in timers where the exchange rate was better than average. I agree with the answer that currency risk is probably the biggest factor in movements aside from the index itself.
    – D Stanley
    Commented Jun 10 at 13:35
  • 4
    @Manó I believe you included dividends when getting the growth % for the ETF. You should exclude dividends for a fair comparison as Nikkei 225 is not a total return index. Commented Jun 11 at 9:46
  • 2
    @Manó yes, I looked at the graph that you linked to and for me, dividends are included in the graph by default (see checkbox) Commented Jun 12 at 2:25
  • 3
    @RadianceWeiQiOng, you are completely right, I had not seen that. Excluding dividends, the ETF has increased 34.8% compared to 5 years ago, so it all adds up.
    – Manó
    Commented Jun 12 at 7:10

There are sites that track tracking errors

e.g. here https://www.trackingdifferences.com/ETF/ISIN/LU0839027447

If you trust this site, you can see that there is no significant tracking error

  • Thanks for the link!
    – Manó
    Commented Jun 11 at 11:15

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