"I liked your recommendation today to keep an eye on the Japanese TSE2. Is there an ETF or other instrument available to invest directly in the TSE2? I also assume that in this case one should cover the currency risk (although you may remember our exchange last autumn about both of us betting on a declining yen, only to continue to be sandpapered to this day)."

David Fuller's view Yes there are and I suggest that you start by going to the Chart Library and conducting a search for Japan. That will produce a menu for all the Japan-related instruments that may interest you. Scroll down and you will see a heading for Asia & Pacific - Funds, ITs & ETFs. It lists the Japan sub-section containing no less than 50 investment vehicles, many of which have been suggested for inclusion in the Library by subscribers over the years. The names will tell you which are small-cap and the codes will tell you where they are listed. This information will help you with your own due diligence.

I will mention three, two of which have been in my personal account on occasion:

Atlantis Japan Growth Investment Trust (AJG LN) (monthly, weekly & daily) is USD-denominated and currently sells at a discount to NAV of over 4%. It is not a small-cap fund per se; here are the top-10 holdings, but I mention it because I know the manager Ed Murner. He is a contemporary, has lived in Japan for many years and very few managers, if any, will have his experience and passion for the challenge.

The JPMorgan Japanese Smaller Companies Investment Trust (JPS LN) (monthly, weekly & daily) is sterling denominated and currently sells at a discount to NAV of nearly 15%. It fits the small-cap criteria but is somewhat illiquid at £71m. Its recent underperformance against TSE2 is probably due to sterling's rally against the yen. Here are the top-10 holdings.

Fidelity Japan Smaller Companies (FJSCX US) (monthly, weekly & daily) is a dollar-denominated mutual fund which may appeal to American investors who are interested in Japan, despite its early withdraw fee of 1.5%. Here are the top-10 holdings.

Investing in Japan since the bubble burst in 1989 has more often than not been an exercise in frustration. However history shows us that it is better to buy when a market is historically cheap, as we see with Japan today, and to sell when it is sufficiently fashionable for people to brag about their returns. If it were me, I would probably opt for Ed Merner's fund on a pullback.

Fullermoney has long maintained that a weaker yen would be required for Japan's stock market to perform, as that would boost operating profits for the country's exporters, with a favourable knock-on effect throughout the economy. Meanwhile, there has clearly been some disagreement between the Japanese government and the BoJ regarding Japan's policy towards the yen. The Japanese Yen Trade-Weighted Index has seen a significant advance since mid-2007, but it shows some evidence of rolling over and a sustained break above 140 would be required to reverse current prospects for sideways to lower trading. Investors with sizeable positions in Japan may wish to hedge against the currency risk.

Meanwhile, those of us who have been rolling forward yen shorts against the US dollar (USD/JPY) (monthly, weekly & daily), could be forgiven for thinking that this practice qualifies as a definition of insanity. The short-term pattern above has a distinctly Sisyphean appearance but at least the lows are gradually rising. I assume that the BoJ will have to print trillions of yen one day, to buy Japan's gargantuan government debt when the proverbial Mrs Watanabe retires and starts to spend her pension money. However I could be several years too early if Japan repatriates its surplus invested in US Treasuries, to fund its own debt, before printing yen with Bernanke-style abandon. I have not yet had cause to hug a BoJ official.