Merricks says that although it has been a perennial underachiever in the past few years, the weakening of the yen helped exporters and the growing trade links between Japan and the rest of Asia could finally see it set for a turn-round.
He says: “Japan has been through the crisis that the UK is currently in and it is also nowhere near as indebted.
“We have seen Japan spike and make 100 per cent two or three times in the past 20 years only to give it back but when experienced managers such as JO Hambro Capital Management’s Scott McGlashan go bullish for the first time in a decade, as he did in 2009, we start to take notice.”
In the past 12 months, the average fund in the IMA Japan sector has returned 7.1 per cent compared with a 27.7 per cent rise in the UK all-companies sector while Europe and the US have returned 31.5 and 17.1 per cent respectively. Over three years, the average Japanese fund has fallen by 14.7 per cent.
However, other advisers urge caution. Hargreaves Lansdown senior analyst Meera Patel says: “It is always a contrarian call and last year was meant to be the year it was expected to perform. I like it but you have to be careful with an area of the market that has had no consistent investment pattern since the late 1990s.”
Chelsea Financial Services managing director Darius McDermott says: “I would be surprised if it is the best or worst- performing sector in 2010. I would agree that it is the cheapest but the point is that it has been getting that way for the past 20 years.”