This week’s ETF Talk expounds on the Japanese crisis and how it could affect you financially. In last week’s ETF Talk, we talked about Japan’s inevitable recovery. As the country begins to rebound -- slowly but surely -- its strongest industries and companies should come back as well. If you want to take advantage of this growth opportunity, check out the iShares MSCI Japan Index Fund (EWJ).

This ETF seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Japanese market, as measured by the MSCI Japan Index. The index seeks to track the performance of the Japanese equity market. As a capitalization-weighted index, it is aimed at capturing 85% of Japan’s total market capitalization.

You will recognize a number of the names in the top ten holdings of EWJ. They represent some of the most well-known brands throughout the world. The fund’s top five sectors, as of February 28, 2011, are industrials, 19.97%; consumer discretionary, 19.35%; financials, 17.90%; information technology, 13.04%; and materials, 7.71%.

In the panic and devastation that ensued after this triple disaster in Japan that featured an earthquake, a tsunami and the partial meltdown of a nuclear plant, the Japanese stock market plunged. Almost immediately, the Nikkei stock market index saw its futures fall 5% in after-hours trading on March 11. Then, on March 15, when news of the impending nuclear disaster became more critical, the Nikkei 225 fell more than 1,000 points in a single day. In fact, the index fell from 10,254.43 at the close on March 11 to 8,605.15 on March 15. That was nearly a 1,650-point drop in only two trading days! The good news is that the Nikkei has begun recovering since its lows on March 15. It had risen to 9,708.79 by press time today.

You should not be surprised, then, that EWJ followed suit when the Nikkei 225 pulled back. From its close on March 11 to its close on March 16, EWJ fell 10.64%. If you look at its top holdings, you’ll see why. Stock prices during the same time period fell 6.12% for Toyota Motor Corp (TM), 6.01% for Honda (HMC) and 8.63% for Mitsubishi (MTU).

The huge drop in EWJ can be seen clearly in the chart above. You also can see, however, a bumpy recovery starting to take shape with the fund. While it still has not recovered fully since the earthquake, EWJ is on its way up, and that’s good news for investors. In fact, this could be a good buying opportunity for EWJ, if you can stomach some volatility.

For advice about which ETFs to buy and to sell, I urge you to sign up for my ETF Trader service. As always, I am happy to answer any of your questions about ETFs, so don’t hesitate to contact me if you have one. To send a question to me, simply click here. You may just see your question answered in a future ETF Talk.