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For the value-oriented investor comfortable with a little added risk and a longer time horizon, it's time to invest in Japan. Seriously.

The words "it's time to invest in Japan" should never be uttered casually. In fact, a

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news search finds the phrase turned up with regularity -- in 2001, 1997, 1994 and so on. Investors who jumped haven't fared well: The average mutual fund focused on Japan lost 23.11% a year over three years and shed 3.93% over five years, placing Japan funds among the bottom three among all fund categories, according to Lipper, a Reuters company. Despite glimmers of hope like 1999's stock market moon shot, the world's No. 2 economy remained mired in a 12-year slump. Talk about contrarian plays.

Yes, Japan's government still has to go beyond half-measures in righting the economy. And yes, many titans of Japan Inc. still move too slowly to turn themselves around. And yes, a lot of people -- including Japan's savings-rich denizens -- remain deathly afraid of investing in Japan. But with stock prices recently hitting 20-year lows, if even a fledgling, slow-growth recovery takes root, the Japanese stock market looks dirt cheap.

"This is a great market for patient investors," said Jean-Marie Eveillard, the outstanding skipper of four First Eagle Funds. One of Eveillard's few questionable moves over the past few years has been his early bullish stance on Japan. However, other value-oriented fund firms such as Longleaf and Third Avenue have taken a shine to Japan as well. "Short of Japan sinking into the sea," Eveillard asked, "how many times in one's life does one get an opportunity to buy securities in a developed market for prices knocked down by a 12-year bear market?"

This week's Five Winning Funds offers a few stellar mutual fund choices for the intrepid investor. The title is a bit misleading: We only chose four funds, not to reflect that everything has shrunk in Japan over the past decade, but rather because these funds offer four prudent, diverse options on tapping Japan. A fifth isn't necessary.

Japan's Nikkei 225, once approaching 40,000, climbed above 9,000 this month for the first time since December 2002. "The Japanese market still looks depressed, but there are real signs of corporate restructuring," said Ernie Chow, a research officer for Barclays Global Investors. "And there are still some world-class companies in Japan, such as







However, Chow and others counsel that Japan may not be a quick success story. Eveillard said his firm is finding a substantial number of companies trading with net cash in excess of market capitalization -- "you are buying them for less than nothing," he said. However, "you have to have time to be invested in Japan."

Also, investors looking to take a chance on Japan would be well served keeping a Japan fund to about 5% of a diversified portfolio. A few quick thoughts when considering the following fund choices: Past results are going to be lousy. But investors shouldn't consider Japan as a way to get in on a hot trend anyway.

Also, each fund represents a different way to play Japan: a concentrated fund that bets on big and small companies; a bigger-cap, growth-oriented fund; a small-cap fund; and an index fund. They share common strengths: Good managers, good firms behind them, no sales fees and relatively low expense ratios. It's up to investors to decide which one -- if any -- is right for them.

1. Matthews Japan

When looking to invest in Asia, the Matthews Asian Funds family is a great place to start. G. Paul Matthews founded the firm in 1991 on the belief that Asia would be the dominant growth region of the coming century. And while Matthews & Co. remain underwhelmed by Japan's efforts to right itself, the firm's


Matthews Japan fund (ticker: MJFOX) has managed to navigate the bumpy terrain better than its peers.

And Mark Headley, who has run the $8.5 million-in-assets fund since its December 1998 inception, sees some real promise in Japan these days. The 31 companies in the fund run the gamut from big names such as Honda to micro-cap companies like fledgling Internet broker


. The unifying theme among the holdings is a "growth at a reasonable price" bent. The separate bets on small-caps and big-caps provide the fund with a bit of a hedge, smoothing out the bumps when either group surges or tanks. While Japan clearly isn't out of the woods, Headley is growing increasingly confident about the country's prospects --

click here to read today's companion interview with the skipper.

The fund has shed 22% a year on average over the past three years, according to Morningstar. While that sounds and is lousy, it beats 57% of its category peers. So far this year, the fund is up 7.97%, beating 98% of its peers. Make no mistake, however: The reason to tap into Japan isn't recent performance. Matthews Japan's conservative approach to the country should make it well-positioned for the future.

The no-load fund's 1.91% expense ratio runs above the other funds on the list, but below the 2.12% category average, according to Morningstar.

2. T. Rowe Price Japan Stock

The $98 million


T. Rowe Price Japan Stock fund (ticker: PRJPX) has a few question marks swirling around it -- besides the gigantic question mark that is Japan itself -- but it nonetheless makes a solid potential choice for investors looking to dip a toe into Japan.

The fund got a new lead manager in Campbell Gunn at the end of 2002, but the new hand has long experience running institutional money and two longtime co-managers remain. A new skipper might be justified, since the fund hasn't managed the past few lousy years with aplomb: Its three-year average annual loss of 26% trails 78% of its peers. The fund's growth-oriented bent -- telecom and mobile-phone companies such as



are among its favorites -- may not play well in a nation facing a low-growth environment.

T. Rowe Price Japan Stock has strong points. First off, the T. Rowe Price has earned its stellar reputation for producing above-average offerings -- and righting funds that don't pass muster. Also, the no-load fund sports a trim expense ratio of 1.35%.

For investors seeking a broader, bigger-cap, growth-inclined Japan fund, T. Rowe Price's offering is a worthy candidate.

3. Fidelity Japan Smaller Companies Fund

There's a belief among some Japan watchers that to truly revitalize the economy, what's necessary is a new generation that breaks free from the ossified mode of thinking that worked after World War II. If there is to be a new generation movement, it would take place among the smaller, domestic-oriented companies that trade on the Jasdaq.

Investors looking to take a chance on Japanese small-caps should consider the


Fidelity Japan Smaller Companies fund (ticker: FJSCX). Thanks to a modest bull market among small-caps the past few years, the $360 million fund has posted 11.94% average annual returns over five years, ranking it in the top 1%.

While Barclays Chow isn't sure the small-cap rally will continue, Fidelity Japan Smaller Company fund manager Kenichi Mizushita has been a solid stock-picker. And while the fund's focus practically guarantees volatility, Mizushita takes a risk-averse approach.

The no-load fund sports a 1.19% expense ratio. (If investors can get their hands on the hard-to-buy Dimensional Japanese Small Company fund -- a small-value index fund with the ticker symbol DFJSX -- would be well-served by that offering as well.)

4. Indexer's Choice: Vanguard Pacific Stock Index

For investors looking for the low-cost, market-matching virtues of an index fund in Japan, the


Vanguard Pacific Stock Index fund (ticker: VPACX) is the way to go.

The $1.72 billion fund isn't a pure Japan fund. It has about three-quarters of its assets in that country, with the remainder investing in Australia, Hong Kong, Singapore and New Zealand -- mirroring its benchmark MSCI Pacific index. That has smoothed out the volatility a bit, and helped lift the fund's returns to the top decile of its peers over one and three years, and better than average over five and 10 years.

The no-load fund's biggest virtue: the 0.37% expense ratio.

For a pure index play on Japan, check out the

iShares MSCI Japan Index fund


, an exchange-traded fund that focuses exclusively on Japan. With a trim 0.84% expense ratio, the ETF gives you cheap exposure to the Japanese market.

P.S. -- I can't take full credit, or blame, for being the first person on to suggest dipping into Japan this year. Contributor and co-founder Jonas Max Ferris gave his reasons for liking Japan in late March.