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Japan's economy is on the path to recovery, and "compelling opportunities" are available to the savvy investor, according to Fidelity International.

Robert Rowland, manager of the Fidelity Japan fund, said in spite of the country being embroiled in a deep recession, signs of economic recovery were appearing.

He said the strain on the Japanese economy remained "considerable", as the International Monetary Fund recently slashed its GDP growth estimate for this year from a contraction of 3.2 per cent to one of 5.8 per cent.

Japan's real GDP for the first quarter also contracted at an annualised rate of 15.2 per cent, the steepest decline in post-war history.

But Mr Rowland said the Japanese government had started to respond to the recession with its largest fiscal stimulus package to date, in addition to a $500bn (£304bn) emergency stock-purchase plan.

The Bank of Japan is also starting to buy corporate paper as part of a quantitative-easing programme similar to those in the US and UK.

Further, the global macroeconomic backdrop is stabilising in the US and China – Japan's two most important trade partners.

Mr Rowland said: “With growing signs of stability in the global economy, the deeply negative growth in the first half of 2009 will give way to modest positive growth in the second half."

But he said international investors remained cautious towards the country, despite growing evidence of a bottoming-out of the economic cycle, large-scale fiscal stimulus packages and reduced stress in the US financial system.

Mr Rowland likened the situation to 2002-03, when Japan was at the trough of the previous economic cycle.

Back then, he said, it was trading close to its book value; now it is trading below its book value, "offering even more compelling opportunities".

Mr Rowland said Japan also tended to have a high correlation with the Organisation for Economic Co-operation and Development's G7 leading indicator, which has seen a recent upturn.

He added: "This bodes well for Japanese equities and possibly accelerates a return of international investors who have low exposure to Japan."