During the announcement, the country’s central bank also warned of a “pause” in domestic growth.

Preliminary figures for the third quarter show the country has indeed paused, slipping into recession as the economy shrank 1.6 per cent between July and September 2014 quarter on quarter, a much bigger loss than had been expected by markets and something of a setback for the prime minister Shinzo Abe.

In the wake of this news, Mr Abe has called a “snap election” for December, which he is more than likely to win and confirmed the postponement of another sales tax hike.

In August this year, the IMA Japan sector saw net retail sales outflows of £66m, having seen modest inflows during the rest of 2014.

However, Michael Woolley, client portfolio manager for Asia equity at Eastspring Investments, reasons: “The Bank of Japan’s recent surprise move to inject more money into the system has resonated well with investors.”

The tax rate increase that had been planned for next year, following an increase to 8 per cent from 5 per cent in April this year, has now been delayed by 18 months. The rate had been due to rise to 10 per cent in October 2015.

Trevor Greetham, director of asset allocation at Fidelity Worldwide Investment, comments: “We have consistently argued this year’s sales tax hike was a mistake. We see its delay as good news for the economy and good news for the stockmarket over the medium term.”

“As investors we always thought Abenomics [Mr Abe’s multi-pronged reform programme] was at its most compelling in its early days when its ‘three arrows’ pointed in the same direction,” Mr Greetham maintains. “We are back at that stage now. Monetary policy has stepped up a gear with a more aggressive phase of quantitative easing. Fiscal policy will be focused once more on boosting growth rather than tightening purse strings prematurely. A reset political mandate will give structural reform more time to take effect.”

Meanwhile, Wouter Sturkenboom, investment strategist at Russell Investments, says he is cautiously optimistic about Japan’s prospects and acknowledges Mr Abe deserves some credit.

“But they do have a long way to go,” he continues. “The actions that they’re now undertaking… have to be followed through into the real economy.

“And that transition… still needs to happen. That’s where we’re cautiously optimistic but also still firmly in wait-and-see mode, because that’s not yet visible in the data – at least, not convincingly so.”

Mr Sturkenboom believes investors are also approaching Japan with caution, which means they are not treating the region as an investment but rather as a trade.

“So people are waiting for that confirmation on the fundamental data front. In the meantime, every time the good news comes in with respect to the stimulus, they pile in and markets rise quite violently,” he explains. “As the good news ebbs then investors slowly trickle out again.

“I think it’s very important for Japan to get that fundamental story up and going and to turn investors from traders into investors.”

Ellie Duncan is deputy features editor at Investment Adviser