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Japanese equities and their corresponding currency, the yen, have seen their fortunes sink in several ways.

Last year, multi-managers headed en masse for the safe haven of Japanese equities. Japan was seen to be in a much sounder financial position than many western countries and managed to avoid many of the calamities that had driven a wrecking ball through the financial centres of Europe, the UK and the US.

Also, the unwinding of the carry trade led to wholesale deleveraging, bringing to an end the pattern of borrowing in low-yielding yen, selling the currency and lending in higher-yielding currencies, which had so damaged the Japanese market.

Gary Potter, co-head of multi-manager at Thames River Capital, says his firm had doubled its weighting in Japanese equities to roughly 15 per cent towards the end of last year.

“This is absolutely the case for us - we were double-weighted in Japanese equities at the end of last year,” he says. “The one main reason for this was the yen. There was a perceived value we saw in the yen as the carry trade unwound, and the yen strengthened unbelievably.”

But Mr Potter’s global boutique fund has slashed its position in Japan in half, to 8.6 per cent. Now that the deleveraging has eased and the Japanese economic figures look dire, the country's attraction has waned among multi-managers.

Mr Potter points to the slow domestic market and the slump in the export sector that has hit the economy as the chief reasons for his reducing exposure to the country.

“Japan looked a relatively safe parking place for cash because it was less hurt by the credit crunch and had a strong exporting market,” he says. “Those pillars don’t exist now.”

Daniel McAllister is a freelance journalist