The euphoria earlier this year that the Japanese economy had finally come right after a decade in recession appears to be short-lived.
In 1999 the Japanese economic turnaround was one of the big stories with the sharemarket finishing up 146 per percent and the yen rising by 88 per cent.
This resurgence, which many believed was linked to changes in the way business was being done in Japan, prompted managers to promote Japanese managed funds.
However, in the past six months Japan has fallen and the prospects are for further falls.
Two major international fund managers who are in New Zealand this week say that the turnaround was a bubble and Japan will be in trouble for a long time yet.
Dresdner RCM Global Investors chief economist Andrew Hunt says that the Bank of Japan committed economic suicide earlier this year when it raised interest rates.
"Japan's economy started to recover last year but a Bank of Japan policy mistake has stopped the economy once again," Hunt says.
When the back raised interest rates it turned off the tap on a source of funds for the Government thus there has been lower spending. (For more details see Features later today).
Dresdner, which managers money for Guardian Trust Funds Management, says economic growth in Japan will be a big fat zero this year.
He says his view on Japan is not the consensus view on that market.
However, one other manager who agrees with him is David Smith from Global Asset Management.
Smith believes Japan's fall in the past six months is just the start of another long descent.
He says there still needs to be "a massive cultural shift" in Japan to get the economy on track, and a change in attitude.
Until that happens the economy has "a lot more financial crisis's to face," he says.
GAM, which looks after money for Tower Managed Funds, is underweight in the Japanese market, but remains overweight in the United States.
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