The db X-trackers MSCI Japan Hedged Equity Fund (NYSEArca: DBJP) is up 34.5% this year while the rival WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) has surged 30%. Asking for anything resembling repeat performances next year may sound greedy, but not impossible.

Concerns linger about Japan’s economy, the world’s third-largest, including familiar refrains such as the country’s high debt-to-GDP ratio, an aging population and the adverse impact of the weak yen on energy-poor Japan’s trade balance.

However, some market observers remain bullish on the land of the rising sun even as it has been 2013’s top-performing global market in local currency terms. [10 Best Global Markets by ETFs]

“The Japanese economy is just one step away from a virtuous cycle (corporate earnings growth leading to increased capex, resulting in wage hikes, supporting higher consumer spending, then back full circle to corporate earnings growth),” said Kazuhiro Miyake, Daiwa’s chief Japan strategist, in a note obtained by CNBC.

For income investors, Japan’s status as one of the ex-U.S. developed markets that is not a great dividend destination could change for the better.

“With Japanese equities one has the potential to see dividends grow over time. Over the last 10 years, dividend growth in Japan has averaged about 7.6% per year2. Dividend-paying stocks could thus be an attractive income source that offers a potential inflation,” said WisdomTree Research Director Jeremy Schwartz in a note earlier this month. [WisdomTree: Enticing Japanese Dividends]

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