Japanese Investment

Investment consultants have urged people to keep cool heads when investing in Japanese markets.

The final week of 2005 saw Japan’s leading stocks rise by over 40%, yet, 2006 has seen panic swallow the market.

The quick sale of IT stocks forced the Nikkei 225 into early closure this week, followed by the index recording its largest daily fall for twenty months as Livedoor, an internet firm, were overwhelmed by scandal.

Yet, the just a few days later, the Japanese index bounced back, enjoying the largest single-session gain since the summer of 2002.

With all the recent turbulence within the Japanese index, investment specialists are calling for people to invest wisely and thoughtfully.

Japan has suffered with economic trouble over the past fifteen years, however, the last two years have seen foreign investors return to the Nikkei, with fund managers claiming that the past year’s gains are no “flash in the pan.”

Justine Fearns, research manager at AWD Chase de Vere, has urged investors to remain level headed.

"There are lots of reasons to be positive about Japan,” says Fearns. “Corporately, it is sleeker, more efficient and more shareholder aware. But that does not mean all of Japan’s ills are cured.

“Stock prices are still very volatile so investors need a fund manager who can ‘cherry pick’ the right stock at the right price. Whilst excitable fund managers talk of the Nikkei hitting 20,000 in two years’ time, it could well be a very choppy ride getting there."

The average returns for people investing in Japan before the Nikkei’s 1989 peak was just 11.6%, while the average fund suffered falls in seven of the following sixteen years.

Annual returns in this period peaked at a much-improved 116.6% in 1999, but have also recorded a fall of 40.2% in 1990.

Date: 24.01.06