NEW YORK ( TheStreet ) -- After years of stagnating, Japanese stocks have soared lately.During the past year, Japan mutual funds have returned 37.4%, according to Morningstar. The gains were triggered by the mammoth stimulus programs championed by Prime Minister Shinzo Abe, who took office last December. Can the rally continue? Yes, say some mutual fund managers. "The government's strategy is working," says Taizo Ishida, portfolio manager of Matthews Japan Fund ( MJFOX). Abe has undertaken a broad-based effort to revive the economy. At his urging, the Bank of Japan began a massive program of bond buying. That has helped to keep a lid on interest rates and depress the value of the yen. The cheaper currency makes Japanese goods cheaper for foreign buyers, boosting exporters of autos and machinery. In addition, the government is spending heavily on domestic infrastructure, a program that has helped construction companies. With the stimulus efforts boosting sales, the economy grew at an annual rate of 1.9% in the quarter ended in September. Corporate earnings for the period are expected to grow more than 50% from the year before. So far, growth has been held back by stagnant wages, says Taizo Ishida of Matthews Japan. But there are signs that pay is poised to climb. With profits growing, corporate managements began to raise bonuses last summer. Now there is more talk about fattening base salaries, Ishida says. "Some companies are saying that they will raise wages next year." To hold a stake in Japan, consider Columbia Pacific/Asia ( CASAX). During the past five years, the fund returned 15.8% annually, outpeforming 83% of peers in the Pacific/Asia category. The Columbia fund now has 40% of its assets in Japan, up from 33% a year ago. "We increased our weighting in Japan when it became clear that there was a dramatic change in government leadership," says portfolio manager Daisuke Nomoto. He says that Japanese stocks remain attractively valued. The Tokyo market sells for 1.3 times its book value, compared with 2.7 for the S&P 500. Nomoto says that Japanese companies can continue to increase earnings because managements cut costs to the bone during the long period of stagnation. With break-even levels reduced, small revenue improvements will translate into big profit gains.