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Japanese stocks have been rallying of late, particularly after Shinzo Abe’s strong victory in snap elections, which gave his party a two thirds majority in the parliament. His win has cleared the way for another round of Abenomics, which means we could see more fiscal and monetary stimulus as well as corporate reforms.

Recently, the Bank of Japan governor reiterated that the central bank would continue its monetary easing policy to ensure that it meets its inflation target of 2%.

Last week, the Nikkei index rose to its highest level in more than 25 years, though it is still far below its 1989 peak.

Japanese economy grew at 1.4% annualized rate in the third quarter. This was the seventh consecutive quarter of growth, the longest in 16 years.

Per Blackrock, Japanese companies’ earnings increased by 17% in the latest quarter—the best year-on-year increase of any major developed market. This trend is expected to continue into 2018, as Japan is an export-oriented economy and its corporate earnings benefit from improving global growth.

Further, the yen has depreciated against the dollar and the Euro this year, which has also boosted corporate earnings.

Japanese authorities have also been encouraging companies to improve corporate governance and increase shareholder value via dividends and buybacks.

Despite recent surge, Japanese stocks still look relatively cheap as they currently trade at about 17 times forward earnings whereas the S&P 500 trades at about 19.4 times.

Foreign Investors have been pouring money into Japanese stocks. Last month, foreign investors bought a net ¥3.43 trillion of Japanese equities, the largest monthly investment since 2005, per FT.

Investors should consider investing in currency hedged Japan ETFs, which offer an excellent way to profit from the rise in Japanese stocks while hedging the currency risk, in case the yen moves lower.

To learn more about the WisdomTree Japan Hedged Equity Fund (DXJ - Free Report) and the Deutsche X-Trackers MSCI Japan Hedged ETF (DBJP - Free Report) , please watch the short video above.