In the second quarter of this year, the Nikkei hit a five-and-a-half-year high, reaching 14,630 for the first time since January 2008.
In the 12 months to May, the Japanese stock market climbed more than 30% - with some active funds earning investors three times that amount.
The market was lifted up by the Bank of Japan announcing significant monetary stimulus - doubling the money supply to kick-start the economy. Added to this more proactive central bank view were a new government and a weaker yen boosting the export economy.
Investors poured cash into what they viewed as a safe bet - with UK savers snapping up Japan funds. And they made cash - Japan funds made up nine out of 10 of the best performing unit trust in March.
By May 22, the market had climbed to a peak of 15,600 – after which it subsequently crashed 3,000 points - losing a fifth of its value in less than a month.
Prompting the naysayers to write the Nikkei - and the Japanese economy – off, for what felt like the fifth time in as many years.
But all is not lost. In the past couple of weeks several high profile asset managers have backed Japan as a sound investment opportunity. The market has recovered somewhat too - up 30% since the beginning of the year, and 50% over the past 12 months. In fact – last Friday alone the market jumped 3.3%.
Paul Niven, Head of Multi-Asset Investment at F&C Investments said he was taking a more positive view on Japanese equities.
“What’s encouraging for the Japanese economy is the increase in June of consumer prices, the first for more than a year, and an indication that Prime Minister Abe’s reflationary policies could be beginning to yield results,” he said.
Sandra Crowl, a member of Carmignac Gestion’s investment committee said that Japan was becoming the only country in the world to benefit from growth-friendly monetary and fiscal policies.
“Inflation trends have become very positive in the last six months, growth in bank lending to the private sector is at a four-year high, and consumer confidence is as good as it has been in seven years,” she said.
“Standing at its lowest level since 1992, the real effective exchange rate suggests a bright outlook for exports. We believe that the government’s reform plans will be concrete and that Japan is preparing a spectacular comeback to the international economic stage.”
Carmignac has conviction in the theme too - Japanese stocks now make up 10% of the Carmignac Investissement fund’s assets.
Thomas Beckett, chief investment officer of Psigma said that after a recent trip to Tokyo he wasimpressed by the economic and political renaissance in Japan and believed “that we might merely be at the start of the revival for the Japanese economy and the stock market”.
He concluded: “Although they are stances that many investors might find awkward, we believe that the momentum in Japanese equities can continue and a value opportunity is ripe for picking in China. As with all investments these days, these two investment opportunities are likely to be volatile but we think they will be very rewarding.”
