Since the credit crunch appeared last summer, the Nikkei index has shed more than a fifth of its value, a decline almost three times greater than that of its US counterpart. Furthermore, Japanese equities have recently started yielding more than domestic 10-year government bonds. Many small-cap stocks are selling below book value. Some contrarian investors are sensing an opportunity. History shows, however, that acquiring apparently cheap Japanese stocks seldom provides an easy route to riches.

It is still not clear why Japanese stocks fell out of bed last summer, while other markets remained relatively stable. Tokyo was hardly the leading miscreant in the subprime mortgage fiasco and Japan's economy was never going to be the only one likely to be affected by a US slowdown. But just because Tokyo responded early doesn't mean the sell-off was unjustified.