MARKET VIEW: Industrial strength

Part of the reason for this stems form Japan's location and the strong export markets of Asia and China in particular, where its strong presence in capital and consumer goods has been a powerful source of growth over the last decade. With any revival in global or regional demand, government-inspired spending and inventory restoration, the Japanese economy will benefit significantly. For example, Japan's manufacturing sector remains at the forefront of global innovation and Toyota (including its Lexus brand) holds a 80 per cent share of the global hybrid automobile market. The country's quest for energy efficiency and innovation will continue to drive advances in the textile, metals and transport industries. If, as we expect, economic growth rebounds earlier in Asia and China continues its stimulus, our view is that Japan's economy and corporate earnings will rebound quite firmly. Indeed, much of Japan's recent earnings' disappointments was affected by the mark-to-market valuation of cross shareholdings which will naturally reverse themselves when equity markets recover.