The re-emergence of large numbers of Japanese stocks trading at a discount to their net current assets - or “net/nets” - attests to the remarkable values now available in the market, says Peter Tasker, research analyst at Dresdner Kleinwort.

He points out that several indicators have been suggesting that Japanese stocks are looking unusually cheap, although the market is yet to be convinced.

“Domestically the cult of the equity was crushed by the post-1990 bear market, and foreign investors have been burned too many times before,” he says.

“Perhaps it will take valuations that are unambiguously cheap globally and historically to draw in capital. We believe such a phenomenon has now emerged in the shape of the 350 “net/nets” on the Japanese markets.”

Mr Tasker says there was good reason for the Japanese stock market to underperform so spectacularly between 1990 and 2003.

“Valuations had to be de-bubbled, and there was little or no growth in corporate value. The market dividend was barely higher in 2003 than in 1983.”

Therefore, he says, it was no surprise that the market rallies in 1992-3, 1996, and 1999 all fizzled out, with the main indices ending lower than they started on each occasion.

“Since 2003, however, market dividends have risen 150 per cent. To claim that nothing has changed in Japan is very wide of the mark.”

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