Last week Japan's GDP suffered a monumental implosion, its finance minister resigned in wine-soaked disgrace and the stock market dipped to within spitting distance of a 25-year low. Inviting 700 high-calibre institutional fund managers from around the world to a dependably excessive Tokyo investment forum was always, therefore, going to require a bit of delicacy.

Poorly handled, one visiting Blackrock fund manager said, the event's aftermath could lead to a sudden, bloody mauling of the Japanese stock market by 700 newly converted bears, each armed with a conference-worth of reasons for turning seller.

And with the jet lag still biting, the guests did not have to wait long for the first red flag on Japan to flutter: the day began with the declaration of bankruptcy by SFCG — a once-mighty financing company whose business involved lending to small and medium-sized companies throughout Japan. With the rate of bankruptcies lurching ever higher by the day, the investors did not need the two dozen analysts on hand at the conference to tell them that the implications of this particular collapse were bleak.

For CLSA, the Asia-specialist brokerage organising the investment forum, the 2009 version of the annual, week-long bunfight is fraught with a grim new brand of “recession hospitality” risk. The austere paradigm means that brokers must simultaneously be upbeat entertainers, but appear to share their clients' pain. These are not times to be visibly frittering on corporate-coloured jelly beans, sequinned cowboy hats and other customary frivolities, but nor are they times to be seen wavering feebly.

The brokers, reportedly roused into a salesman's frenzy by their managers early yesterday morning, know that there is a balancing act to be performed. The clients may be forgiving if last year's snazzy conference rucksacks become paper-fibre eco-bags this year, but CLSA's core business of touting stocks must press on with the traditional ballyhoo or the trades will simply stop coming in.

Comfortably the trickiest problem, one veteran Japan investor said, is that the material that the brokers are working with this year may just not be up to the job. As things stand, it would take a huge contrarian leap of faith to decide that Japan is either cheap or cheerful enough to buy. One of the earliest presentations yesterday was by Eric Fishwick, CLSA's head of economic research. The first slide was simply entitled “Blowout!”. The second announced that the house had slashed its 2009 GDP forecasts, citing a toxic smorgasbord of terrible news.

The sheer pace and violence of Japan's economic collapse - the annualised 12.7 per cent quarterly GDP contraction announced last week - has shocked even the most dispassionate of economists, let alone CLSA's 700 clients with billions of dollars of chips still riding on Tokyo's tables. Those same clients have, of late, absorbed an inexorable flow of doom-laden parsing of Japan's prospects - what Richard Jerram, Macquarie's chief Japan economist, called an analytical “race to the bottom”.

Only one analysis - a note by Albert Edwards, Société Générale's strategist - presents a glimmer of hope and even its author admits that he would be reluctant to buy Japan and that there is currently “not a chance” of a cyclical recovery. Mr Edwards's theory, though, is that the emphatically strong yen is “seriously misaligned with economic reality” — a feature of the unwinding of carry trades and other speculative side-effects. The phase of yen strength, he argues, may now have ended. “It matters to the rest of the world that Japan will get considerably more competitive,” he said.

However, elsewhere, predictions of Japan's impending misery have grown ever more bearish. Some have forecast that Japanese unemployment will rise from its present 4.4 per cent to 10 per cent and that “levels of actual human suffering” will be far worse than in past recessions.

Others have speculated that the yen's continued strength, political deadlock and plunging exports could usher in a deadly phase of “Japan selling” in which all asset classes are simultaneously dumped. Many have noted the seemingly endless ability of Japanese consumers to pull in their horns and economise to a degree that makes a domestic-led recovery seem remote.

Companies, equally, offer little encouragement. Although a few, such as retailers of cheap clothes and food, have done well, the capitulation of consumers at home and abroad has left much of corporate Japan in agony and few are willing to speculate where the market will bottom until companies have issued fiscal 2010 profit forecasts around May.

Only then, CLSA's strategist said, will it become meaningful to discuss whether so many blue-chip Japanese stocks deserve to be trading so far below book value.

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