An election victory for Japan's Democratic Party of Japan could result in significant opportunities for investors, according to Simon Somerville, manager of the newly-launched Jupiter Japan Select fund (Sicav) and manager of the Jupiter Japan Income fund (Unit Trust).

Simon, who has just returned from a trip visiting companies in Japan, says it is looking increasingly likely that the Liberal Democratic Party's grip on power - almost unbroken for 53 years - is coming to an end.

He said: "Support for the DPJ has increased since the election of Yukio Hatoyama as party leader in May and it is possible that the party will gain power when Japan goes to the polls sometime before the end of October. This could create significant opportunities as the party is less close to the bureaucrats than the ruling LDP and greater reforms are possible as a result. They are, for example, planning to curb the practice of 'amakudari', under which retiring bureaucrats take up high-profile positions in the private and public sectors. This acts as a drag on economic and political reforms.

"The DPJ are also committed to raising Japan's disposable income with policies more focused on the domestic economy, targeting themes such as the environment, housing, nursing care and highway tolls. This would support the current focus of my funds on the domestic economy.

"With recent GDP data showing that the economy contracted at a record pace in the first three months of the year (14.2% year on year), this really does seem like the 'dark side of the sun'. However this is largely down to the export sector, which is suffering from the decline in global demand, rather than the domestic sector, which has been far more stable and has not suffered a financial crisis as other major markets have. We have probably seen the worst of the poor economic and earnings news flow. With the Japanese government spending 5% of GDP on its economic stimulus packages, the domestic economy should generally be on an improving trend.

"In addition, while the news flow in the export sector has been dire in the near term, increased intra-regional trade should provide significant benefits and less reliance on the West in the long term. Trade with China, for example, is now greater than trade with the US, which offers significant opportunities."

Simon says companies in Japan are focusing on cost cutting but still have too much domestic capacity. He said: "In the past Japanese corporates have been pretty successful at restructuring their businesses - over the past decade many have increasingly used part time and contract employees as well as expanding overseas production to deal with increasing demand - and so it is perhaps not surprising that these are now the very areas that are being cut. However, there is no doubt Japanese companies have too much domestic capacity and this is an area where we are seeing no real cuts at all.

"Domestically, overtime and bonuses are being cut but full time employees are, so far, largely safe in their jobs (albeit earning less). This lack of labour reduction domestically appears to be a deal with the powerful unions who will accept wage freezes, bonus and overtime cuts but not job cuts; there is also clearly a stigma attached to cutting domestic jobs and capacity and no one wants to be first.

"The lack of domestic capacity and labour reduction has important implications for asset allocation within Japan. So long as unemployment remains subdued then domestic consumption will be relatively robust - conversely if exporters are unable to reduce these expensive costs their margins will remain under pressure. So until the status quo changes domestic names still look more attractive."

Jupiter Asset Management launched the Jupiter Japan Select fund (Sicav) on 1 July 2008. The fund, a sub-fund of the Luxembourg-domiciled Jupiter Global Fund, seeks to achieve long term capital growth through investing in Japan but also has the flexibility to invest up to 20% in other Asian countries, such as Hong Kong, South Korea, Taiwan, Singapore and Malaysia. It may also hold government bonds.

The value of investments can fall as well as rise and may be affected by exchange rate variations.

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NOTES TO EDITORS

JUPITER JAPAN SELECT FUND FACTS

· Sub-fund of the Jupiter Global Fund
· Registered in Luxembourg and the UK. Seeking registration in Austria, France, Finland, Germany, Jersey, Sweden and Switzerland
· Launch date: 1 July
· Price: £10, ?10 or $10 a share depending on the currency class the investor chooses
· Managed by Simon Somerville
· Benchmarked against the Topix Index ($)
· Fees: up to 5% initial and 1.5% annual management charge
· Minimum initial investment: £1,000, ?1,000, $1,000 in respective share classes
· £, ? and $ share classes
· Sterling share class to be run so as to qualify for 'distributor status' so gains in the Fund can be treated as capital gains, not income, for tax purposes

SIMON SOMERVILLE BIOGRAPHY

Joined Jupiter in 2005
Over 19 years experience in fund management.
Manager of Jupiter Japan Income, Jupiter Japan Select (Sicav) and Japan element of the Jupiter Global Managed Fund
Simon is a bottom-up stock picker who adheres to the GARP (Growth At a Reasonable Price) school of investing.
Seeks to hold portfolio of 45-55 stocks and will typically look for opportunities among small and medium sized companies.

ABOUT JUPITER

Founded in 1985, Jupiter has become one of the UK's leading fund management groups for private and institutional investors. We manage assets across a wide range of international and UK based mutual funds, multi-manager products, hedge funds, institutional mandates, and a variety of portfolios specialising in markets such as the UK, Europe, Asia and Emerging Europe, as well as specialist thematic investments such as socially responsible investments (SRI) and global financial equities.

Majority owned by employees since June 2007, Jupiter's independent structure reinforces our commitment to producing strong investment performance and high levels of customer service.

Jupiter has two Sicavs - the Jupiter Global Fund Sicav and the Jupiter Merlin Funds Sicav. These products are promoted in Europe by Martina Guenzl, who covers Austria, Germany and Switzerland and, Simon O'Donoghue, who covers Scandinavia and the Channel Islands.

Jupiter Asset Management Limited (JAM) is authorised and regulated by the Financial Services Authority in the UK. The registered address is 1 Grosvenor Place London SW1X 7JJ. The above commentary represents the views of the Fund Manager at the time of preparation and may be subject to change. They are not necessarily those of Jupiter and should not be interpreted as investment advice. Past Performance should not be seen as a guide to future returns, the value of an investment and the income from it can fall as well as rise and may be affected by exchange rate variations. Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given.