Nick Hodgson, a director of Thornton, which manages the Japan Growth unit trust, believes the Japanese economy is at the bottom of a trough and will recover, particularly if interest rates are cut further. 'Japan didn't realise the severity of the problems it faced,' he said.
The future may provide better returns for Japan funds. In the run up to its general election earlier this year, the market experienced a nine-month bull run, and returns for UK investors were enhanced further by the strength of the yen.
MGM's Special Situations fund is invested in UK smaller companies, which have been hit severely by the recession in the UK. Gregor Logan, investment director at MGM, said the fund has had a change of managers and performance has been improving over the last year.
The top-performing unit trusts over the past five years tended to be those invested in the Far East excluding Japan. The funds at the top of the table benefited from the soaring Hong Kong market, fuelled by money from China and the US.
Peter Chesterfield, director of Abbey Life unit trusts, pointed out that its fund was also 20 per cent invested in Malaysia, which has had one of the top performing economies in the Far East.
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