Share prices in Japan have the potential to make further headway once the uncertainty surrounding Shintaro Abe's appointment as prime minister of Japan has passed, according to Simon Somerville.

Somerville, who has notched up strong out-performance since launching the Jupiter Japan Income Fund a year ago, says that while Abe had been widely tipped to replace Junichiro Koizumi as prime minister, yesterday's confirmation that he will take up the role next week will not be enough to quell investors' nerves. He said: "Koizumi has been widely respected as a reformer, pushing much-needed reforms through in Japan. He leaves Japan in a healthy state, with the domestic economy driving the recovery.

"However, investors are concerned at how Abe will manage the economy going forward. There are some concerns that he will seek a greater consensus on reforms than Koizumi, effectively bringing restructuring to a standstill. This would be a negative for markets. However, my view is that the transition will be smooth. Abe has been a central figure in the government for several years and there is no reason to suspect he will make wholesale changes, at least in the near term."

In the year since its launch, the £68m Jupiter Japan Income Fund has gained 14.33% against 8.28% for the sector average. This return places the fund 5th out of 58 in the sector.*

The Fund's top decile performance has been driven by strong stock selection focused on three key areas: domestic stocks such as East Japan Railway; companies with strong growth and attractive valuations, such as gas firm Taiyo Nippon Sanso; and companies with good cashflow that are returning value to shareholders though dividends, such as Benesse, which provides educational services.

Somerville, who has just returned from a trip visiting companies in Japan, says the continued message from businesses is that the domestic economy remains strong. He says: "Japan is geared into global growth - statistically a 1% fall in US growth results in Japan's GDP falling 0.2% - but the strength of domestic demand more than offsets this effect."

"While equities have not performed well this year - the result of significant foreign redemptions and domestic scandals - the positive economic backdrop and the removal of uncertainty over Abe's appointment creates the right environment in which Japanese shares can out-perform other markets. I continue to favour domestic growth stories over exporters and have recently taken an overweight position in retailers such as Marui and Parco, which are good quality businesses with attractive valuations."

- ENDS -

Notes to Editors:

* Source: Standard & Poor's Micropal 19.09.05 to 18.09.06