Is Japan back on track for a real recovery?

This week Japan's prime minister Shinzo Abe returned with a ‘third arrow' plan for structural reform. Wether his plans succeed remains to be seen but other factors mean sustained recovery is on the cards for Japan, says Andrew Rose, manager of the Schroder Tokyo fund.

In May, Japan's broad-based Topix index managed to rack up its first month of gains in 2014. Following on from 2013, when market returns were over 50%, investors could be forgiven for feeling disappointed. However, the picture now is in stark contrast to the outlook at the same time last year. Then, the weakening yen was spurring market gains and over the course of 2013 the Japanese currency fell 18% against the dollar. That the market moved in tandem with the depreciation of the currency was no coincidence and we saw this trend continue into the first few months of this year as the y...