For some managers, such as David Jane, fund manager on Miton's multi-asset fund range, there have been few reasons to pile into Japanese equities in recent years but there may be hope on the horizon.
He says: "We have no exposure to these, having sold out at the end of 2015 and early 2016. Before, we had a big exposure for the (prime minister of Japan) Shinzo Abe rally.
"The size of the economy and the stock market makes Japan difficult to ignore so we are unlikely to maintain our zero exposure in the medium term, given these attractions."
There are two main reasons underpinning the confidence that Nathan Gibbs, client portfolio manager of Japanese equities for Schroders, currently has in Japan.
He explains: "The combination of aggressive monetary policy and strong fiscal stimulus should be very supportive for the equity market.
"Also, improved governance and shareholder payouts are a strong, long-term incentive for investors, especially as current valuations look reasonable, given the profit growth we expect to see over the next couple of years."
For Cyrique Bourbon, portfolio manager at Morningstar's Investment Management group, Japan is the home of "several market-leading companies" which are cash rich and increasingly focused on shareholder returns.
This is a key benefit to discuss with income-hungry clients, he suggests.
Recovery
For Ben Willis, head of research for Whitechurch Financial Consultants, there is the potential of greater recovery among Japanese equities.
Japanese exposure gives investors access to a currency often considered a safe haven, meaning sterling investors tend to get compensated for holding the yen at times of stress.Cyrique BourbonHe comments: "In this quantitative easing-influenced world, all risk assets have risen in value, driven by the low interest rate environment that has been with us for eight years.
"This has made it more difficult to identify opportunities between and within asset classes. On a relative basis, Japanese equities are relatively cheaper than other developed market equities, and offer the potential for recovery. Whether this occurs or not remains to be seen."
Katsunori Kitakura, strategist at SuMi Trust, says: "The Japanese like gradualism and tend to follow the 'first mover' mentality. So we believe advisers should focus on active, bottom-up stock pickers who can monitor the ongoing positive developments at a company level within Japan and take advantage of the longer-term opportunities that exist within Japanese equities."
Macro woes?
It is difficult for your clients to ignore the macro environment and this must be factored into any long-term financial planning decisions.
Kwok Chern-Yeh, head of Japanese equities at Aberdeen Asset Management, admits Japan's macro environment is "clearly unusual" and one reason for the confusion in markets at the moment is that policy makers seem to be treating structural issues as if they were cyclical - which could cause investors to forget how deep and mature the stock market is.
Mr Kitakura says: "It is understandable investors looking at the broader Japanese market will continue to question the likelihood of the government and Bank of Japan's ability to deliver fundamental change via the goals set out by the Abe administration.
"Although the overall desire to deliver change from a macro-economic perspective is a challenge, it must be understood that changing the mindset of both Japanese corporates and individuals will take time."
But the quality of corporate Japan should not get lost in the mire of headlines and soundbites about the macro-economic environment.
Mr Kwok explains: "The Topix is home to 1,900 companies; the market has more than 3,500. Corporate Japan emphasises product and process excellence - it has long experience of managing costs and supply chains are highly sophisticated.
"The country is an outstanding opportunity for the diligent stock picker prepared to do his own investigation and deploy capital patiently. And it offers considerable diversification potential."
According to Whitechurch's Mr Willis: "In relative terms, the Japanese market has its attractions but also plenty of risk. It is all about diversification, however, so holding a small portion of an appropriately risk profiled portfolio in Japanese equities does have its merits."
Headwinds
Robin Black, investment manager for global equities at Kames Capital, says as Japan's stock market is export dependent, it is "therefore driven by exogenous factors such as the yen or global demand.
"So it is difficult to make a compelling buy case for Japan if you anticipate a strong yen or global economic slowdown."
However, despite these potential headwinds, Mr Black adds: "If growth accelerates or the yen weakens, these factors will help the market.
Over time we have identified high-quality businesses with attractive growth prospects, which have grown against a challenging industry backdrop.Alex Blake"We see value in Japan - it is trading on 13 times price to earnings ratios, compared with Europe on 16 times or the US on more than 18 times. Not only is it cheap relative to other markets, it is also cheap compared with its historic levels."
Differentiation
Morningstar's Mr Bourbon believes it is important for advisers to explain the difference between the state of the economy and the state of the markets.
Mr Bourbon explains: "It is important to explain equity market returns have a weak correlation to economic performance.
"It is also important to instill a valuation-first mindset, which in the case of Japan appears relatively attractive on most metrics.
"Also, Japanese exposure gives investors access to a currency often considered a safe haven, meaning sterling investors tend to get compensated for holding the yen at times of stress."
Given also that there are structural buyers of the market - large companies doing buy-backs, the government pension fund and the Bank of Japan itself, this can support the market, according to Mr Black.
Diversification and risk
Nick Peters, multi-asset portfolio manager for Fidelity International, says the conversation has to start with "the benefits of diversifying across regional equity markets".
He says: "Academic studies have shown over the long-term, the worst losses of global equity portfolios over five to 10-year horizons have tended to be smaller than portfolios investing in just a client's home market.
"Investing in Japanese equities should be done on the basis of what benefits the market can offer an investor and the advantages of diversifying your equity exposure."
Miton's Mr Jane says Japan is one of the least correlated markets with the rest of the world and therefore offers equity exposure with less risk, so is attractive from a portfolio construction point of view.
Active management is also important when it comes to avoiding macro risk, according to Alex Blake, client manager on the Baillie Gifford Japanese equities team.
He says: "We are bottom-up stock pickers. As such, the returns we can generate for clients are driven by the fundamentals of the businesses we own, not macro factors.
"Over time we have identified high-quality businesses with attractive growth prospects, which have grown against a challenging industry backdrop."
