McGlashan says his fund is well positioned for the recovery in Japan: 'The collapse in growth and profits was unprecedented in the post-war period. Corporate Japan is now recovering rapidly. Profits began to rebound in the summer of 2009 and will accelerate in the current year. As a result, the valuation of Japanese shares should fall to near 50-year lows on most metrics.'

Corporate Japan has already de-leveraged, and the level of corporate gearing has fallen back to the levels prevailing in the 1960s. At a time when the ability of companies in the United States and Europe to expand is inhibited by their need to de-leverage, Japanese companies are exceptionally well placed to take advantage of the potential growth that emerging markets or new technologies may provide.'

In the three years to the end of February McGlashan has returned 0.7% on his JOHCM Japan fund in sterling terms compared to -10.25% decline in the Topix Index. His maximum drawdown over this period was -24.3%.

Eoin Treacy's view
'Scott McGlashan: 2010 could mark a new beginning for Japan - Thanks to a subscriber for this interesting article by Dylan Lobo for Citywire. Here is a section:

McGlashan says his fund is well positioned for the recovery in Japan: 'The collapse in growth and profits was unprecedented in the post-war period. Corporate Japan is now recovering rapidly. Profits began to rebound in the summer of 2009 and will accelerate in the current year. As a result, the valuation of Japanese shares should fall to near 50-year lows on most metrics.'

Corporate Japan has already de-leveraged, and the level of corporate gearing has fallen back to the levels prevailing in the 1960s. At a time when the ability of companies in the United States and Europe to expand is inhibited by their need to de-leverage, Japanese companies are exceptionally well placed to take advantage of the potential growth that emerging markets or new technologies may provide.'

In the three years to the end of February McGlashan has returned 0.7% on his JOHCM Japan fund in sterling terms compared to -10.25% decline in the Topix Index. His maximum drawdown over this period was -24.3%.

My view - These are interesting statistics but our view remains that a medium-term bullish outlook for the Japanese stock market is predicated on the Yen weakening. Also see yesterday's Comment of the Day.

The Nikkei-225 remains a regional laggard but has sustained the range above 9000 since June 2009 and more recently found support in the region of 10,000. A sustained move below the latter level would be required to question scope for further higher to lateral ranging. The Topix Index continues to range below 1000 and would need to sustain a move below 875 to question potential for at least some additional firming within the range.

The Topix Banks Index remains under pressure as it attempts to build support in the region of the March 2009 and 2003 lows. However, a sustained move below 125 would be required to question scope for further higher to lateral ranging.

The Topix 2nd Section Index found support near 2000 in November and remains in a relatively steady uptrend. A sustained move below 2050 would be required to question current scope for further higher to lateral ranging. The Nikkei Jasdaq is outperforming somewhat and moved to a new recovery high last week. A downward dynamic would be required to question potential for further upside.

All of these indices are relatively steady performers but appear in need of the weaker Yen to improve export profits, if they are to return to positions of global outperformance.