Some commentators, such as Newton’s Iain Stewart, have said that Japan’s monetary easing policy will end in disaster, but Whitley says there has been a huge transformation in the country, with monetary easing far less important than the government’s commitment to economic reform.
She warns that investors are underestimating the importance of the new government’s commitment to deregulation and increasing free trade – and of the huge public support for this path.
Whitley adds that Japan is just emerging from the multi-decade debt-deflation sickness that the UK seems to be entering, transforming the central dynamics of how it operates.
"Sometimes with Japan, people are quite slow to change their ideas about what’s happening," she said.
“Don Quijote [a holding of the fund] isn’t covered by many of the sell-side analysts despite the fact that it has been one of the fastest-growing companies in the country for some years, which is absolutely crazy."
"We look at Japan quite differently from most people investing in the market. First, because we are trying to think longer-term, not wasting time on quarterly results."
"Secondly, because we are investing in what will be the growth area over the next few years rather than what has happened in the past decade."
The Japanese economy has struggled for many years, with one of the key reasons being the poor health of the banking system.
Whitley says that this has massively improved over the past decade, with banks having completed the hard slog needed to repair their balance sheets.
"The whole situation in the UK and US is starting to sound a lot like what happened in Japan 10 years ago," she said. "A lot of the headlines are the same."
"You get this debt deflation and the banks have to shrink their balance sheets and the government is shrieking at the banks to lend."
"The reality is it just takes a long time. It is true that Japanese policy-makers thought that if they ignored some of the problems they would go away through a healing process, but it takes time."
"I think that’s what happens when you have a credit blow-out."
"Japan has been through 20 years of this, and now their banks are buying up the assets being sold by western banks."
"They are less damaged now as they were more cautious in the cycle up to 2008."
Baillie Gifford Japanese is one of the most consistent performers in the IMA Japan sector over the past decade, having produced returns below the sector average in only two calendar years.
The £240m fund is a top-decile performer over one, three and 10 years, and top quartile over five.
Although the fund is managed with the long-term in mind, it has been one of the biggest beneficiaries of the rising market over the past year, returning 38.15 per cent in 12 months, the second-best result in the IMA Japan sector.
Performance of fund vs sector and index over 1yr
Source: FE Analytics
The manager says that far more important than the monetary easing policy which is most often commented on is the "third arrow" of the government’s reforms: regulatory reform and deregulation.
The government has convened a committee to consider how to reform the economy to make it more competitive, hiring some of the most successful Japanese businessmen and telling them not to fear offending the government.
The new administration, headed by prime minister Shinzo Abe, is also determined to accede to the TPP free-trade area which includes the US.
Negotiations are ongoing that are likely to see a compromise on tariffs or controls to protect the US car industry and the Japanese rice industry, politically sensitive areas in their respective countries.
"It has already had bilateral talks with the US on what exemptions are going to be made," Whitley said.
"We think that will be the catalyst for future reform."
"There’s a huge sense of purpose in Japan. We are not saying that it will necessarily work, but it’s a serious effort and what they have done now is more serious than people thought it would be even last year, and Abe is more popular than he was when he was elected."
"When he entered into the TPP negotiations he became more popular."
Whitely says that the monetary easing could be more effective than people imagine if Japanese investors continue to react as enthusiastically as she has so far.
"I think that the Japanese individual investor has the best record of getting the market right. Mrs Watanabe [shorthand for Japanese housewife speculators] has been buying the market while institutions are selling the market to de-risk."
"If they manage to move from deflation to inflation that would be very interesting. There’s ¥15trn [£98,322bn] in cash under the mattresses in Japan."
"If people start to worry that prices could rise it could lead to massive behavioural changes, but we are not at that stage yet."
Although the manager says it is an exciting time in Japan, she stresses that she has always found good companies that are able to grow regardless of the macro-economic picture.
The country is home to businesses that have seen extensive growth coming from selling outside Japan, particularly high-technology machinery and robotics.
"At the moment we think there will be good growth opportunities in Japan, but there are opportunities even when the economy isn’t growing much."
The manager says that while some investors are slow to react to the changing situation in Japan, others remain too focused on the immediate future.
"Just by reading what people write, most of it is just about what is going to happen in the next year," she said.