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ON JAPAN

DAVID VARLEY, manager of the Royal London Japan Growth fund on Japan

Japan may well be the cheapest equity market in the developed world. At just 1x the book value of its assets, it seems a bargain compared to the US (2.4x), UK (1.7x) or Germany (1.4x). The average for the last 15 years in Japan is 1.7x, and we are close to the 40-year low of 0.85x reached at the height of the credit crisis. In theory the risk/reward trade-off looks compelling. So why are investors not buying Japanese stocks? Firstly, it might be noted Japan has, in recent times, generated lower profits from its assets than other markets (averaging return on equity of 6.4% in the 2000s...