With the US election just weeks away, investors would perhaps be forgiven for overlooking the political scene in Japan while they mull over the respective outcomes from a Harris or a Trump presidency. 

But election volatility has reached Japan too – with the recent vote delivering a massive blow to the ruling Liberal Democratic party which lost its majority on Sunday. 

This sudden turmoil could come as a blow to portfolio managers, who have largely benefited from Japan’s revival as a newly-reformed corporate governance hub after decades of disappointing returns. 

The manager of one of the more idiosyncratic Japanese equity funds in our database – Zennor Japan – says it brings “uncertainty and political paralysis” to the table. 

We, like many of our readers, will be used to fund managers insisting that everything is fine and that now is the perfect time to invest in the sort of fund they manage - despite the flames licking the walls around them.

But James Salter, founder of Zennor Asset Management, offers some bracing honesty - which perhaps should make allocators even more concerned than they might have been before.

“This is a negative for the market in the short term,” said James Salter. “The yen could weaken further and reignite the whole 'carry trade' concerns of August.”

He added that the real risk to global markets lies with the yen and the fact the correlation between surging technology shares in the US and the currency’s weakness has been almost 100 per cent.

Somewhat ominously for allocators to Japan, he said: “Next year we may have the perfect excuse for a genuine bear market correction in global markets. Blame [prime minister Shigeru] Ishiba.”

We first noticed signs of discontent back in July when one allocator told us they had cut their Japanese exposure significantly because they saw signs of the nation’s recovery story faltering.

You can read more about DFMs losing their faith in Japan here.