The case for investing in Japan has been repeated many times in vain, but this time it’s really different if you are to believe Pictet Asset Management.

The world’s third largest economy has had a bumpy ride for several years and stocks have been hit by falling prices, a strong currency and natural disasters.

Pictet now thinks that reconstruction and infrastructure development after the Fukushima nuclear catastrophe that followed the tsunami and earthquake in March last year will add to the country’s GDP growth.

What is more, the Swiss firm believes that the deflationary era, which has dogged the country for nearly two decades, is now coming to an end. The Japanese equity team at Pictet highlights that the Bank of Japan set an explicit target rate of inflation of 1 per cent earlier this year in an announcement known as the Valentine’s Day message. The country’s central bank also extended its quantitative easing programmes.

The Bank of Japan was the first central bank to embark on QE and the country has tried virtually every form of asset-buying programmes for more than 10 years. Sam Perry, senior investment manager in the Japanese investment team at Pictet, does not believe that the extensive pumping of money into the economy will have unwanted consequences: “If QE led to a bit of inflation in Japan, investors would be happy,” he said at a media roundtable in London.

“Japan has a memory of hyperinflation which it experienced after the war,” Perry said. “But it is very difficult to engineer hyperinflation, it is more relevant what the commercial banks are doing, and they are not doing much.”

Pictet even believes that the deflationary environment has made many Japanese companies more efficient: “They have lived and breathed cost-savings for 20 years,” Perry said.

“Corporate Japan is sitting on huge amounts of cash, but they are investing it and building factories overseas, in China and Thailand,” he said. “That gives them cheap labour.”

Perry also said that large parts of the Japanese equity market are being overlooked, and that two thirds of the companies in the Topix (a stock index with over 1,600 companies) have fewer than two analysts covering them. The corresponding figure for the US is 4 per cent. “There is a severe information deficit, the only way is to go there and do in-depth research, and if you are able to that, it is an advantage,” Perry said.

“That the Japanese just copy things is a standard myth that you hear again and again,” he said. “But it is simply not true; they have an amazing stranglehold of material science. You have a swathe of Japanese companies that are world leaders.”

Pictet mentioned Honda, Denso and Daihatsu in the car industry, Mistubishi Electric and Fanuc in factory automation, Canon and Nikon in digital cameras, and Daikin and Nippon Ceramic in energy efficiency.

“There is competition from Taiwan, Korea and Vietnam, but Japanese corporates keep investing in research and development,” Perry said.