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BEAR MARKET IN JAPAN MAY FINALLY BE FINISHED

No bear market lasts forever, and some canny analysts think the brutal bear market in Japan may finally be over. They say it's time to buy.

Barton Biggs, chief global strategist for Morgan Stanley, is telling clients there's a 70 percent chance that Japanese stocks hit a final bear-market low in early July, with the Nikkei 225 index at 14,449 - down from nearly 40,000 at the end of 1989.The Nikkei's recent rally is part of what's encouraging Biggs. He thinks many international portfolio managers will have to buy more stocks so that their Japanese holdings more closely approximate the weightings of the Japanese market in foreign-stock indexes.

Many international stock managers have dramatically underweighted Japan in recent years. The fundamental attraction, Biggs says, is that he "can find truly cheap stocks in Japan," such as Hitachi and Fuji Photo Film.

Biggs is not the only Wall Street analyst who sees value in Japan.

Jean-Marie Eveillard, the manager of top-performing SoGen International, also likes the looks of Fuji. He says the company is loaded with cash and sells at a huge discount to Kodak, its U.S. competitor.

Shares of Fuji, in the form of American depositary receipts, can be purchased on the Nasdaq small-cap market. The ticker symbol is FUJIY.

Rich Fentin, manager of Fidelity Balanced, is also bullish on Japan. He says some of the world's premier companies there sell at or below book value.

Individual investors who have well-diversified portfolios and who have a yen for adventure might consider a small position in a mutual fund that invests only in Japan.

T. ROWE PRICE JAPAN (800-225-5132) is the top performer among no-loads, up an annualized 11.6 percent over the past three years. Scudder's JAPAN FUND (800-225-2470) and FIDELITY JAPAN (800-544-8888) are also solid choices.

Biggs, however, couples his bullish stand on Japanese stocks with a "maximum bearish" position on Japan's currency. If the yen does depreciate against the dollar, U.S.-based investors could find gains in the stocks eroded by currency losses.

Among no-load Japan funds, only one, Warburg Pincus Japan OTC (800-888-6878), has fully hedged its yen exposure, meaning its performance should depend entirely on its manager's stock-picking prowess.

If the dollar resumes its descent against the yen, however, the unhedged funds should outperform the Warburg Pincus vehicle.