JO Hambro Capital Management's Scott McGlashan is confident the Japanese economic and stockmarket recovery will continue in 2010 as western economies remain hamstrung by a lack of capacity.

McGlashan, who once famously warned investors to avoid Japanese equities when he was at Invesco Perpetual in the early 1990s, said the combination of an easing in Japanese monetary policy and the culmination of quantitative easing elsewhere could be a new beginning for the country, benefitting investors in his JOHCM Japan fund.

He said: 'Last year was a year of quantitative easing for central banks around the world, except Japan which only increased its balance sheet by 6% whereas the Fed and Bank of England doubled theirs. Japan did not join the party last year. No monetary stimulus artificially pushed up share prices.'

'At a time when the Fed, ECB and Bank of England are looking for exit strategies, the Bank of Japan has huge capacity to ease. Over the next year or two the actions of central banks threaten to undermine the rally in security prices see in developed world over the past year, with the exception of Japan where central bank activity could help push prices higher.'

McGlashan also points out that on most metrics Japanese equities are near historically cheap levels and strong research and development bodes well for Japanese trade and innovation over the long term.

David Fuller's view Japan has been a serial underperformer for longer than most of us care to remember. However I do not assume that this will always be the case, although Fullermoney's bullish view remains contingent on the yen weakening, for reasons mentioned previously. Meanwhile, the yen was the weakest currency last week but appears to be one of the strongest today, in what I trust is no more than a temporary bounce from a very short-term oversold condition. I just received this item from Black Swan Capital, which discusses the yen in more detail. For the shorter version, scroll down to their "Bottom Line".

Scott McGlashan's fund has been added to the Chart Library, which contains an extensive section (I searched the Library under 'Japan Fund'). It's performance relative to Topix, mentioned in the final paragraph of the article, has been flattered by sterling's weakness. The fees are not cheap, with a negotiable front-end load of 5%, Current Management Fee of 1.25% pa, Expenses Ratio of 1.39% pa, and a 15% performance fee.

There are plenty of vehicles for investing in Japan, should one wish to do so, and subscribers are always encouraged to conduct their own due diligence. The big call, in my view, is whether or not Japan will outperform over the next year or more. Subject to the yen weakening, I think it could for reasons cited above, in addition to what has been mentioned previously on this site. Meanwhile, Topix appears to be completing a lengthy base formation.