There are tactical arguments for holding Japanese equities and property but a big strategic call on such markets depends on whether the country’s government makes further structural reforms, argues Standard Life Investments.

In the latest edition of the firm’s Global Perspective report, it looks at the risks and benefits of investing in Japan, a country that has been notorious for a run of “false dawns” in recent years as the Asian economy has struggled to emerge from decades of sluggish growth.

"Cyclical arguments and structural triggers are currently informing investors’ thinking as they re-examine the case for investing in Japan. Policy announcements after the election of a new government in December sparked major shifts in the Topix and the yen, both moving over 20 per cent within a few months,” Andrew Milligan, head of global strategy at SLI, said.

“Many investors have hurriedly moved from light to neutral in their allocations to Japanese equities and are debating the approach to real estate and bonds,” he said.

“Japan has seen a long series of attempts to turn the economy around. Historically, it has been right to doubt just how sustained any Japanese policy initiatives will prove to be. The present occasion is not yet any different, it is a tactical call to prefer some Japanese assets but the strategic decision is still to be taken. If change is lacking, then investors should look to ‘rent’ Japanese equities for a short period, rather than ‘owning’ them for the longer term,” he said.

Standard Life Investments is part of the UK-listed Standard Life firm, which is also parent of Standard Life Wealth.

Standard Life Wealth has been shortlisted for an award at the WealthBriefing Awards 2013, to be announced in London on 2 May.