Editor's note: as investors try to assess the fast-moving events in Japan in the wake of last weekend's massive earthquake, this publication will issue thoughts from wealth managers about the likely medium-term impact. Here are comments from Thomas Becket, chief investment officer at PSigma in the UK.

It is extremely difficult to discuss investment matters relating to such sad events as Friday's earthquake and subsequent tsunami in north-eastern Japan, especially when the grim reality of the situation is still being uncovered.

In addition, the uncertainty caused by the ongoing nuclear plant woes does not allow us the comfort of easy prediction. Our thoughts are of course with those who have suffered from the disaster. However it is our job to assess the risks to our investment strategies and client portfolios.

Friday's calamitous events have caused the Japanese market to shed close to 20 per cent in the last three sessions, wiping out all of its hard-won gains for the year, with the Nikkei 225 now down 15.9 per cent in 2011. Understandably, many of the export companies, where our exposure is chiefly focused, have been sold off aggressively, as the companies have had to stop production due to power-related issues and safety concerns.

As far as we can be aware, the area that has been worst-affected was not a major industrial area. Furthermore, reports in Japan have suggested that life outside of the region is gradually getting back to normal and power outages will be hopefully ceasing in the near future. However, with nuclear power being a large proportion of the total Japanese power potential (30 per cent), there are now large questions that need to be answered as to its future usage, both in Japan and in other parts of the world. 

The impact on consumer and business confidence in an already weak economy is much harder to gauge and the nascent economic recovery in Japan is certainly at risk.

However, we do not expect this sad event to be overly destructive to Japan's medium term economic trajectory. The ironic reality of such tragedies is that they can actually be positive spurs upon economic output, but we of course do not know that to be true in this instance.

It is no surprise that Japanese financial authorities have been quick to respond and the Bank of Japan announced yesterday that it will add a further ¥5 trillion to its asset purchase programme and is providing ¥15 trillion (around $183 billion) of additional liquidity to financial markets. It actually pumped more cash in to the financial system again this morning. However, they clearly have not done enough yet and a far more aggressive policy approach is critical.

Does this situation materially affect our thesis that Japanese equities look good value? In the short term, it is totally impossible to judge and we would be guessing if we were to try to make predictions on the direction of the Japanese equity market for the next few sessions. However, we strongly feel that in the medium term, our patience with Japanese equities will be rewarded. The facts that were important for Japanese companies before the crisis, such as an improving global economy and cheap valuations, remain in place.

In addition, a key part of our argument was that Japanese exporters were likely to benefit from a weakening currency in the next few years, which would be a tailwind for the exporters, who in the last few years have had to suffer from an ever-strengthening currency, which rendered their products unattractive on a global level when compared to other nations'. The simple fact remains that the Japanese government is ill-placed to have to pay for much of the damage.

Understandable comments from the finance minister over the weekend that the government would have to cast aside any remaining fiscal rectitude and pay whatever it takes, would be comfort to their citizens and a warning sign for global bond investors. Japanese bonds were extremely unattractive investments before this crisis and are even more so now. Issues in the bond market could be enough to push the yen over the edge.

Elsewhere in global equity markets, there has been a painful reaction to events in Japan, with the FTSE 100 down over 200 points in the last few sessions to around 5,600. The UK market has now fallen by close to 10 per cent from its recent peak achieved in February. Markets in Asia and Europe are behaving in similar fashion, whilst the US is also forecast to suffer material weakness in the short term. Any “risk” investment is being hit hard, with commodity markets and currencies like the Australian dollar selling off aggressively.

No amount of experience can prepare you for events such as this in Japan and we are of course worried about what we own (specifically equities) and worried about what we don’t (high quality government bonds). We believe that our portfolios have an attractive blend of “attack” and “defence” and are well diversified. We are using the weakness in global markets to move to an overweight stance in equities, having moved back to neutral in mid-February. 

We will of course continue to monitor events extremely closely in the next few weeks and we will not be afraid to make hard decisions as we see fit. We are in regular communication with our Japanese fund managers to learn as much as possible about the likely implications.