The east-Asian country has led the global equity market so far this year thanks to the huge monetary stimulus injected by the Bank of Japan in an attempt to reflate the economy.
The outcome has been impressive: the Nikkei 225 has returned 29.67 per cent so far this year while the MSCI AC World index has returned 20.21 per cent.
Performance of indices year-to-date
Source: FE Analytics
Japanese equities did correct recently, however, but as the graph shows they have bounced back significantly.
Becket (pictured), who manages the Psigma Dynamic Multi Asset fund, says this is because the market is realising that the underlying Japanese economy is improving.
The manager, who has recently flown back from Tokyo, expects this trend of rising share prices to continue for some time to come. "The recent market recovery since the May mini-crash reflects an improving confidence at both a consumer and corporate level," he said.
"Where once there was a sense of doom and depression, there is now hope. This is an amazing change."
"Previously, Japanese fund managers desperately tried to sell you their ever-shrinking funds on the basis of extremely cheap valuations; now they convincingly talk of a renewed sense of activity in the Japanese economy, long overdue reform and pent-up demand."
"Our conclusions are that we remain very bullish on the medium-term outlook for Japanese equities. The economy itself is definitely starting to warm up, primarily led by consumption, but followed now by improving industrial production and manufacturing, despite softening global demand."
"Domestic companies, many of whose profitability has been boosted by the weak yen, have been tentatively adding to capital expenditure and are starting to boost wages, as Abe-san has demanded."
"Tax breaks on business investment should help this further. Importantly, confidence and cash has started to drip from Tokyo to other regions in Japan, broadening the economic revival," he added.
According to FE Analytics, Becket’s £20m Psigma Dynamic Multi Asset fund has returned 45.01 per cent since its launch in September 2008 while the IMA Mixed Asset 40%-85% sector has returned 41.11 per cent.
Becket says he has recently bought the offshore Lazard Strategic Japanese Equity fund. In addition, his ninth-largest holding is Jupiter Japan Income, which accounts for 4.6 per cent of AUM in his fund of funds.
The £612m Jupiter Japan Income fund was launched in September 2005 and is managed by Simon Somerville.
Our data shows that the fund is a top-quartile performer in the IMA Japan sector since its inception, with returns of 48.66 per cent, beating its benchmark – the TSE Topix – by more than 10 percentage points.
Performance of fund vs sector and index since Sep 2005
Source: FE Analytics
Jupiter Japan Income has a yield of 2 per cent, which is low compared with UK and European income-producing funds.
Somerville’s fund has an ongoing charges figure (OCF) of 1.75 per cent and requires a minimum investment of £500.
Becket understands that investors may be wary of investing into a market that has already performed strongly.
A few months ago, he told FE Trustnet that he had top-sliced his exposure to Japan as he felt valuations had gone too far too quickly; two days later, Japanese equities pulled back considerably.
However, he is again bullish on the region and says investors should not be put off by the already strong returns, adding that the long-term growth potential is still very much there.
"Even after the 70 per cent rally we have enjoyed from Japanese equities since last November, when Abe-san came to power, we don't think it is too late to be looking for opportunities in Japan," Becket said.
"From a valuation perspective it is hard to argue that Japanese companies are expensively valued and there remains the potential for a long-term growth surprise, which is under-appreciated by investors."
"Indeed, if Abe-san is successful in weakening the yen further then Japanese companies could still be very cheap. We also think that the high levels of scepticism from many global investors and under-ownership of Japanese equities could lengthen this rally substantially."
"Fund managers who have refused to consider investing in Japan on the understandable basis of two decades of barely interrupted pain are now feeling the heat of a market that has soared from the November lows and is up nearly 40 per cent this year."
"There are obvious risks to the implementation strategy of Abenomics and it would be naïve to suggest otherwise, but we believe as great a risk could be resisting the temptation of owning a healthy weighting in Japanese equities," he added.
Becket’s Psigma Dynamic Multi Asset fund has an OCF of 2.53 per cent and requires a minimum investment of £10,000.