Given everything else taking place in the world right now, the news Japan's economy grew at its fastest pace on record in the third quarter seems to have gone relatively unnoticed.
Having fallen a huge 28.8% in the second quarter, it was announced on Monday that the world's third-largest economy grew an annualised 21.4% between July and September.
Not only was this the largest increase since comparable data became available in 1980, it also marked the first increase in four quarters and beat a median market forecast for an 18.9% gain.
The rebound was driven largely by a record 4.7% surge in private consumption, as households boosted spending on cars, leisure and restaurants.
"Between July and September, economic activity in Japan experienced a return to a somewhat normal status as the government lifted the state of emergency in the country and further afield Europe and the US also lifted their lockdowns," says Naoya Oshikubo, a senior economist at SuMi Trust.
Looking ahead, Oshikubo believes Japan's GDP figures in the next quarter should continue to show signs of recovery, albeit at a slower pace as he says pent-up demand should decelerate mainly owing to second waves of the pandemic overseas.
"However, the spread of the virus in Japan seems to be under control and the country is in a relatively favourable position to resume its economic recovery, although this will still be modest," Oshikubo says.
So how is this translating into investment opportunities in Japan? Year-to-date the MSCI Japan index is up 8.25% and the Nikkei 225 Index has risen 13.56%, while funds in the IA Japan sector have produced an average return of 9.63%.
Shuntaro Takeuchi, lead manager of the Matthews Japan strategy at Matthews Asia, notes that for many years Japanese equities have not been considered a place to invest, but rather a place to trade in and out of.
"Investors tend to buy Japan when things bottom out and improve, then get out when things start to peak," he says.
"However, the dynamic has meaningfully changed since 2010 as Japanese corporates have been generating improving levels of profits at the bottom of the cycle. Japan has turned from pure value to cyclical growth."
Despite this, Takeuchi believes many global investors remain sceptical of the change, which for him is where the investment opportunity lies.
"Looking ahead three to five years, we ask ourselves two questions: will the economy get worse or better from now? And will global interest rates begin structurally rising or stay low?" he says.
"The Japanese equity market in our view is a beneficiary of incremental improvement in economic activity and profit growth driven by innovation - not a structural interest rate increase," he argues.
"For the past decade, the Japanese market has consistently outperformed European markets and even the Asia ex Japan market, driven by these two things.
"Over a medium-term horizon, we think the answers to both questions will continue to be favourable for Japan."
Chris Metcalfe, investment and managing director at Iboss, has historically been underweight in Japan relative to the respective IA multi-asset benchmarks.
He says he has found the country's lack of success in achieving their economic goals using unconventional monetary policy to be "somewhat troubling".
"Each time it didn't work, their answer was to try even more of the same and they were unique in this approach for many years," he says.
"What has changed since Q4 2018 is that central banks, led by the US Federal Reserve, have given up any pretence of normalisation of interest rates. Additionally, they have alluded to the fact that they don't really know how to create inflation anymore."
Metcalfe says with the European Central Bank being in a similar, if not worse, position and the lack of tools in the monetary tool boxes of central banks, brings Japan back into play.
"Many of the policies and the rhetoric initiated by the Japanese government and the Bank of Japan have become globally ubiquitous, therefore there is no longer any reason to be underweight in Japan on monetary and economic policy grounds," he says.
A change in leadership
While Japan's latest GDP numbers might not be hitting the headlines, the resignation of Prime Minister Shinzo Abe in August owing to ill heath, most certainly did.
Archibald Cignaner, portfolio manager of the T. Rowe Price Japanese Equity fund, says during Abe's eight-year term he established political stability, enhanced Japan's international presence, and introduced ‘Abenomics', a new brand of constrictive and social reform.
"Abe's resignation was initially taken negatively on concerns his reform and dovish agenda would be cancelled," says Cignaner.
"However, we have been encouraged by his replacement, Yoshihide Suga, and the early signs are reassuring. He has already introduced a Digital Reform Agency and seems even more focussed than his predecessor on the economic reforms we believe Japan requires."
For Cignaner, with Japanese companies in net cash and corporate standards continuing to improve - even as profits have come under pressure - he believes the asset class is an attractive proposition and trades at a discount relative to regional peers.
"As we enter the next stage of the equity cycle and the evolution of domestic and international political governance, we continue to believe that Japan is a compelling active management case given the market is under-owned and that it displays positive change dynamics," he says.
"We also believe that the expected global economic recovery next year will provide a cyclical tailwind for Japan."
When it comes to investing in Japan, Metcalfe says his preference remains for active funds, noting the importance of good stock selection.
"The vast dispersion of returns among Japanese equities means the best active managers have plenty of opportunities," he says.
"Given these opportunities also come with commensurate risks, we will be looking to use multiple funds within our allocation, which is a hallmark of our style of investing."
In the last five years, Metcalfe notes Japanese equities have lagged much of the rest of the developed world, including the rest of Asia, and remains far behind the all-time highs it reached in the 1990s.
"While the longstanding issues of poor demographics and an ageing workforce prevail, a positive factor is that it has fared relatively well in the pandemic," he says.
"The so far, well-marshalled handling of the virus gives the Japanese economy and potentially its equity market the opportunity to perform well on relative basis.
"The virus situation puts the country in stark contrast with ones such as the US, which is witnessing exponentially rising new daily cases and has an administration bereft of any collegiate plan to tackle the pandemic."
As active investors in Japan, Takeuchi says he is searching for opportunities in innovative technology and services, which is naturally leading him to the broader tech and healthcare sectors.
"Two major themes we continue to monitor are labour productivity improvements and combatting rising health care costs," he says.
"Labour populations are peaking in the US and China as the world begins facing issues that Japan has been facing over the past few decades. Baby boomers are nearing 70 years old and birth rates remain at record lows in almost all advanced economies.
"When you ask which companies have thrived amid a steady decline in labour force, ageing society, low birth rates, shrinking domestic demand and deflationary environment, the answer is growth companies.
"They have provided solutions to these structural challenges. Successful Japanese growth companies now have the opportunity to grow outside of Japan as these trends are starting to be felt globally."