Viable investment options in Japan are becoming increasingly thin on the ground. It is the fourth wealthiest nation on earth, but investors have concerns about its business culture.
Japan hit the business headlines in recent weeks after it was left wounded by violent anti-Japanese protests against its big-brand shops in China - a backlash against the government's controversial decision to buy two privately owned islands.
Worse still, steep falls in exports drew attention to its financial vulnerability while investors lost their appetite for Japanese stocks - extra doses of pain on top of the fallout from last year's devastating tsunami and earthquake. Despite fund managers hailing a turnaround after 20 years of decline, its anticipated resurrection in the wake of the disaster is looking increasingly far-fetched.
The real rot was already setting in, and deepening. Japan is currently among the richest countries you could name on one hand but, shockingly, it is on track to fall out of the league of developed nations by 2050, according to warnings by the 21st century Public Policy Institute.
But what, or who, is to blame for the dragging down of this once mighty economy? The answer is multifaceted - but a glance at its gloomy demographic outlook reveals a rapidly shrinking and greying population, giving rise to slowing productivity and shrivelling savings and investments.
And far from feathering a fertile environment for growth, analysts say its business culture is fostering a flaccid economy - which they describe as verging on communist. Rather than allowing businesses on the brink to go under as in 'free market' nations such as the UK, the government props up cash-strapped Japanese businesses to protect its reputation.
This is "capitalism with warts", according to Gary Reynolds, chief investment officer at Courtiers.
Warning that Japan is on course for an economic contraction that could last up to half a century, Mr Reynolds has put his money where his mouth is and retracted every last pound of Courtiers' investments in Japan, in favour of countries with sunnier long-term growth prospects.
"Sure, Japan makes fantastic cars, phones and computer games, but its cultural politeness makes it hopelessly inefficient. We can forgive poor performance in the short term as long as the long-term outlook is at least steady. But Japan can't even offer us this. And why would anyone sit on Japanese holdings when equities in the UK, US or even Europe could bring you far better returns?" he says.
A quarter of global fund managers are now underweight in Japanese equities, according to Bank of America Merrill Lynch, but many fund managers are still peddling Japanese funds, insisting axing them completely from a portfolio is a big mistake.
They would say that, but their arguments should not be flippantly discarded. And you may find some comfort in the fact that every fund manager Investors Chronicle spoke to said they were substantially invested in the funds themselves.
The line they tend to pull out of the bag first is that the state of the economy doesn't necessarily correlate to stock performance. References to the underperformance of the Chinese stock market in the early 2000s despite a wider economic boom are popular defences - and cannot be ignored.
They're also confident in their stock selection - particularly when it comes to companies with a small-to-medium market capitalisation and looser ties to the economy. By tactically buying stocks while they're 'on the way down', fund managers can get in cheap and deliver great returns. And Andrew Rose, manager of the Schroder Japan Growth Investment Trust, says Japanese equities are more of a bargain now than he's ever witnessed in the 31 years since he first started working with funds in 1981.
Given the warning signs, exercising an extra level of caution when investing in Japan feels like a smart move - but working out whether any of the funds on offer are worth the perceived risk is more of a conundrum.
It's difficult to believe there are no opportunities for investment in one of the world's most moneyed hotbeds for innovation, and pulling the plug on Japan all together could stifle your portfolio's diversification. Scattered among the rubble there may be some gems to be found in Japan, but not all of them can offer a reliable long-term investments. An extra level of scrutiny is therefore required.
For our selection of fund options that will get you exposure to this area read Best Japan funds.
