JERSEY CITY, NJ -- (Marketwire) -- 09/03/08 -- The Japan Equity Fund, Inc. (NYSE: JEQ), a closed-end management investment company, today announced its performance results for the three months ended July 31, 2008, the third quarter of its 2008 fiscal year.

For the quarter ended July 31, 2008, the Fund incurred a net investment loss of approximately U.S. $59,000 (equivalent to a loss of less than U.S. $0.01 per share) resulting in net investment income for the nine-month period of approximately U.S. $376,000 (equivalent to income of U.S. $0.03 per share). In addition, net realized and unrealized losses from investment activities and foreign currency transactions during that same three-month period was approximately U.S. $9,558,000 (equivalent to a loss of U.S. $0.67 per share). As a result, the net realized and unrealized loss increased to approximately U.S. $19,617,000 (equivalent to a loss of U.S. $1.36 per share) for the nine months ended July 31, 2008.

In comparison, during the quarter ended July 31, 2007, the Fund incurred a net investment loss of approximately U.S. $181,000 (equivalent to a loss of U.S. $0.02 per share), resulting in net investment income for the nine-month period of approximately U.S. $28,000 (equivalent to income of less than U.S. $0.01 per share). In addition, net realized and unrealized gains from investment activities and foreign currency transactions during that same three-month period were approximately U.S. $1,825,000 (equivalent to a gain of U.S.$ 0.14 per share). As a result, net realized and unrealized gains increased to approximately U.S. $4,912,000 (equivalent to a gain of U.S. $0.35 per share) for the nine months ended July 31, 2007.

On July 31, 2008, the total net assets of the Fund were approximately U.S. $105.0 million. The net asset value ("NAV") per share on that date was U.S. $7.28, based on 14,431,605 shares outstanding. In comparison, total net assets on July 31, 2007 were approximately U.S. $127.5 million, equivalent to a NAV of U.S. $8.84 per share, based on 14,431,605 shares outstanding. The Fund generated a negative investment return of 15.45% for the nine months ended July 31, 2008, when measured against the NAV per share of U.S. $8.61 on October 31, 2007, based on 14,431,605 shares outstanding at that time. During the same period, the Fund's benchmark, the Tokyo Stock Price Index (the "TOPIX Index"), decreased by 14.42% in U.S. dollar ("USD") terms.

As of July 31, 2008, the Fund had 98.16% of its net assets invested in Japanese common stocks. The remaining net assets were represented by a short-term USD-denominated time deposit (0.08%) and other assets less liabilities (1.76%).

As of September 2, 2008, the Fund's net asset value per share was U.S. $6.73, based on net assets of U.S. $97.1 million. At the same date, the market price of the Fund's shares on the New York Stock Exchange closed at U.S. $6.17, representing a trading discount to net asset value per share of 8.32%.

Market Review and Outlook

For the quarter ending July 31, 2008, in Japanese yen terms, the equity part of the Fund had a negative 4.77% return while the TOPIX Index returned a negative 4.01%.

Relative to the TOPIX, the sector allocation effect on the portfolio was a negative 0.67%, while the stock selection effect was a negative 0.09%. Our underweight position in electric power & gas and foods, along with our overweight position in electrical appliances were the major factors contributing to the negative sector selection effect. Following the rebound from the market lows in mid-March, the Tokyo market once again began to decline beginning in early June on concerns of a deteriorating global economy. Our sector strategy to overweight cyclicals and underwight defensive sectors adversly affected the portfolio.

Stock selection in iron & steel and chemicals contributed positively, while stock selection in transportation equipment and real estate had a negative impact. Major positive contributors during the quarter were Sumitomo Metal Industries (iron & steel), Nisshin Seifun Group (foods) and Shin-etsu Chemical (chemicals), while Tokyo Tatemono (real estate), Xebio (retail trade) and Denso (transportation equipment) contributed negatively. Sumitomo Metal Industries advanced as investors anticipated strong orders for its seamless pipes used in drilling oil wells, following production increases by oil producers. Nisshin Seifun rose after the producer of flour and processed foods was expected to regain its earnings momentum with price hikes and cost cutting efforts. Shin-etsu Chemical advanced after the manufacturer of polyvinyl chloride and silicon wafers announced a remarkable earnings outlook for fiscal year 2008 despite the challenging business environment. A worsening credit situation for non-bank financial companies and newly emerged real estate companies caused related stocks in these sectors to drop severely. Tokyo Tatemono was not an exception in this regard. Xebio declined as the sluggish sales trend of the sporting goods chain continued due to weak consumer sentiment and was compounded by tough year-on-year comparisons. Denso fell following a downward revision of its fiscal year 2008 earnings forecasts.