Of course, there are still concerns. The debt burden – at more than 200 per cent of GDP – is still the highest in the developed world. The ambitious target to balance the country’s budget by 2020 is unlikely to be hit, with the most recent government statistics suggesting that the deficit could still be as wide as ¥6.6tn (£39.2bn).
Efforts to rebalance the country’s books are being hurt by the shutdown of nuclear power in the wake of the Fukushima disaster, which has necessitated importing other forms of fuel.
Equally, there is no plan B for the country if Abenomics fails. Japan’s economic situation is unsustainable in the long term, and it is unclear what will happen if the current reforms fail to address the problems.
Mr Burdett is overweight Japan and has been for some time. However, he has hedged the currency for a large part of his exposure. The yen has seen significant falls since the start of Abe’s reforms last year and unhedged investors have lost out.
A key advantage of Japan is that it dances to its own tune. It has shown less correlation with other developed markets historically as it deals with a unique set of economic circumstances. Mr Treves believes that the current rout may provide a buying opportunity.
Certainly, valuations do not look as stretched as elsewhere in developed markets, but Abenomics still has to deliver.
Cherry Reynard is a freelance journalist
ABENOMICS - WHAT IS IT?
Prime minister Shinzo Abe’s reforms consists of ‘three arrows’:
Arrow 1 - Aggressive Monetary Policy
In January 2013, the government and Bank of Japan jointly introduced the idea of a price stability target with the aim of achieving 2 per cent inflation. This was followed in April 2013 with the start of quantitative and qualitative monetary easing (QQME).
Arrow 2 - Flexible fiscal policy
In January 2013, Japan put together an economic stimulus package, with an additional budget of ¥10tn (£59.7bn). In December a further economic stimulus package was announced valued at ¥5.5tn to try and counter the impact of the consumption tax increase in April 2014.
Arrow 3 - Structural reform of the economy.
Deemed the most difficult and important of the three arrows, reforms proposed include reducing the rate of corporate tax, agriculture reform and electricity reform..
JAPAN - WHAT THE EXPERTS THINK
Rob Burdett, co-head of multi-manager at F&C Investments, is a supporter of the Coupland Cardiff Japan Alpha fund, which is a portfolio of mid-cap growth companies, mostly with a domestic bias. He says: “Japan is coming out of two decades of underachievement. Its banking sector is in good shape and can start to lend if there is demand in the economy. This is a structural advantage. Equally, the
