In today's climate of soaring food and fuel costs, it is hard to imagine anyone welcoming inflation.

However, news that prices are rising in Japan — after languishing in a deflationary spiral for more than a decade — has been greeted with optimism by global-fund managers.

Nearly one-third of Japanese households expect inflation in the coming year to be 5% or more, according to consultancy Capital Economics.

While actual inflation is unlikely to top 2%, even that is a turnround in a country where people are used to deflation. It is hoped that rising prices will encourage Japanese consumers to hit the shops in case prices are higher in future, after years in which there has been no incentive to spend.

Economic growth has also been strong. The Organisation for Economic Cooperation and Development recently increased its annual growth forecast for Japan from 1.6% to 1.7%. Other economists have also become more upbeat.

Julian Jessop, chief international economist at Capital Economics, said: “This would mark the sixth-successive year when growth has been at or above Japan’s relatively low sustainable rate (1.5% or slightly higher).

“This contrasts sharply with the US or the UK, where economic growth both this year and next is likely to be well below potential and labour markets are clearly weakening.”

Not everyone is convinced Japan has hit the yellow-brick road to recovery though, with doomsayers pointing to the country’s reliance on cash-strapped US consumers.

We asked two global-fund managers to give us their views on whether now is a good time to take a punt on the Japanese market.

Chatfeild-Roberts heads Jupiter’s independent funds team. He recently doubled the Japanese stock-market exposure of the Jupiter Merlin Worldwide scheme to 10%.

“Japan has seemingly been in a deflationary environment forever. So when inflation went positive in March, it sent shockwaves through the international investment community.

“Inflation is still only expected to hit 0.1% on an annualised basis, which is not huge by anyone’s standards, but it is still very, very significant in the context of the Japanese situation.

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