Year of the Dragon?

This is the third in a series of stories examining the outlook for international funds. Check out our previous articles on European funds and emerging market funds.

While Asia mutual funds have been bouncing back from a difficult 2000, Japan funds are still sitting out the party, and it could be a while before they put on their dancing shoes again, analysts and fund managers say.

After a dismal 2000 that saw Pacific/Asia (except Japan) funds shed 28.5% on average, the category is leading Morningstar's ranking of international funds so far this year, with an average year-to-date return of 4.78%. Two funds in the category are up more than 20% already.

Meanwhile, diversified Pacific/Asia funds that include Japan are down an average of 0.88% after a drop of almost 35% for the category last year, while Japan funds are down almost 5% this year, compared with a loss of 35% last year. ...