Japan may have been the first of the developed economies technically to emerge from recession, but the fear now arises that its progress is on a "W-Shaped", "Double-Dip" course. The portents do not encourage optimism: this is a society whose population is declining, whose tax revenues are falling, and which has seen a slew of business failures.
Add to this a heavy dependence on exports whose competitiveness is being challenged, coupled with a deflationary environment at home, and it is difficult to see how the second-largest economy in the world can remain so.
Then we have Japan's debt: the ratio of debt to GDP is currently running at around 170 per cent, and forecast to rise to 200 per cent in fairly short order. Forget Dubai's paltry $80bn, the Japanese authorities plan to issue the equivalent of a further £950bn in government bonds in 2010, to fund stimulus measures. Issuance on this scale must drive up bond yields, and a question mark has to be placed against the country's ability to service the coupon, let alone repay the capital.
Those of a cheerier disposition point to the fact that more than 95 per cent of this debt is held by Japanese people and businesses, which is meant to point to some elevated degree of stability: Japan is home to the biggest savings pot in the world. But thereby hangs the moribund nature of the domestic marketplace - prudence trounces consumerism - and by extension the country's vulnerability to declining demand for its exports.
Against this backdrop we can wonder at the fortitude of investors in this sector, and it is instructive to look at the extent to which teeth-gritting has been necessary. Our table contains the best examples in this group, contrasted with those funds at the foot of the rankings that must surely have had their investors' eyes watering.
Total Return Bid-Bid performance table, from UK IMA UT and OEICs universe
| Name | 1-yr | 3-yr | 5-yr | 10-yr | Volatility |
| Schroder - Tokyo |
8.44 | -8.19 | 10.29 | -8.48 | 16.70 |
| Invesco Perpetual - Japan |
41.78 | 13.06 | 41.64 | -14.03 | 17.90 |
| AXA Framlington Japan |
-1.27 | -23.67 | -0.85 | -17.44 | 22.30 |
| IMA Sector - Japan |
6.93 | -16.98 | 4.19 | -39.76 | 19.00 |
| Nikkei 225 Index |
17.42 | -7.50 | 19.43 | -41.43 | 21.00 |
| BlackRock - Japan |
-2.63 | -34.43 | -19.09 | -56.07 | 19.00 |
| JPM - Japan |
0.62 | -25.59 | -16.21 | -61.47 | 23.30 |
| Legg Mason - Japan Equity |
-4.96 | -50.21 | -54.35 | -65.88 | 29.00 |
Source: Financial Express Analytics (data to 02/12/2009)
Let us get the bad news out of the way first. It would perhaps be harsh to describe this as a fall from grace, but there was a time when Hideo Shiozumi was hailed as a master of Japan's SME zone, and a star manager.
But the numbers on that bottom row tell a story about Legg Mason's Japan Equity fund that can hardly be said to bear this out. We have included both longer- and shorter term periods so as to give breadth to what has been the result of Mr Shiozumi's custodianship. Those negative total returns - headlined by a 10-year, 65 per cent leakage - look more than a little relentless, and these results come at a cost in volatility that is the highest in this sector.
Moving up to the leaders, over that 10-year term, the best we can say about Schroder's Tokyo fund is that at least it did not hurt too much, and if investors had got in and out at the right time they might have seen a return. With the lowest volatility in the sector, the chances of this happening were better than most, but timing always remains a matter of luck. What is striking here is that Schroder's Andrew Rose carries a portfolio that is packed with big-name Japanese equities.
We should not let the moment pass without touching on another much-heralded Japan wizard: David Mitchinson runs JPM's Japan offering, having been recruited from Framlington on the back of his success in running money in this marketplace. His fund's Top 10 holdings are liberally dotted with unfamiliar names, and Mr Mitchinson is associated with a contrarian approach. This may well come good in the longer term and, to be fair, the 10-year 61 per cent vanishing cash act has not all happened on his watch.
The examples cited are not intended to be ad hominem criticisms, but should serve to illustrate how even the most talented managers can come up against adversity in a distinctively different, and intractable marketplace.
There is a case for investing in the Japan sector; it is usually served up along the lines of "diversification; second-largest economy in the world and, ignore it to your detriment".
When it comes down to the hard facts, though, the choice for investors appears to be one between either losing your shirt, or getting a scuffed cuff.