THE double dip merchants have seen some success in their predictions, but not as significant as hoped, as the stock market encountered a tricky start this month.

Doom and gloom have had the upper hand, but before any falls in value could approach previous lower levels, the economic figures and prospects have been riding to the rescue like FTSE vigilantes.

Economists at the International Monetary Fund (IMF) have previously had very bearish predictions on the UK economy.

Last week, they made revisions to state that economic recovery in Britain would happen earlier than it had previously thought.

In its latest world economic outlook, the IMF said the UK economy would grow by 0.2 per cent in 2010, a sharply better outlook than the 0.4 per cent fall in gross domestic product (GDP) it predicted in April when it last produced forecasts.

The conclusions were in line with recent data, which suggests that the UK economy is over the worst.

If anybody thought our economy had taken a dramatic turn over the past couple of years, they should spare a thought for Japan.

Leading economists expect that Japan’s economy snapped a record four straight quarters of contraction to expand in the April to June period, a government-affiliated group said in a report released last week. The country’s real GDP may have grown 1.98 per cent in annualised terms during the period, according to the Economic Planning Association’s ESP forecast.

Before saying “so what?”

just consider the fact that the Japanese economy contracted by a record 14.2 per cent in the January to March quarter.

Japan has suffered for a long time in being the most over-valued market, in comparison to other markets.

With the Nikkei 225, the most significant Japanese index, still less than half the level of the peaks seen in 1996, 2000 and 2007, this is no longer seen as expensive.

On a price/earnings valuation method, Japan is, however, very expensive.

This contradicts what I have just said.

The reason, though, that the price/earnings valuation is so high is merely that historic earnings have been so very low.

Many Japanese companies are trading on very cheap price to book valuations.

This means that the valuation in the market is less than the book value.

In trying to explain this; the market value, as implied by the share price, is less than the value that could be obtained by breaking up the company. Usually, it is the case that a market valuation should trade at a premium to the break-up value.

Japan is a significant export-led economy, the second biggest in the world, and has clearly been hit hard by the global recession.

One advantage it has as recovery takes over from recession, is the fact that it does not have distressed banks or very high borrowing levels. As the rest of the world continues on its deleveraging of debt, Japan concentrates on its manufacturing base.

It is obvious that demand from Japan’s export areas of the US and Europe remains downbeat, but China is becoming a growing demand centre for Japanese goods.

I will turn back to the UK market.

Last week saw more encouraging news from the house builders sector. It is clear by now that house prices have stabilised in the UK. The news is becoming increasingly more positive.

* Anthony Platts is a divisional director in the Teesside office of Brewin Dolphin, and can be contacted on 0845-213-1340. All prices quoted in the article are from public sources. The views expressed are not necessarily held throughout the Brewin Dolphin Group. You should bear in mind that no investment is suitable for all circumstances and it is important to seek expert advice if in any doubt.

Brewin Dolphin Limited is a member of the London Stock Exchange, authorised and regulated by the Financial Services Authority.