When Japanese stocks were all the rage in the 1980s, many of them traded at stratospheric prices—in some cases with price-earnings (P/E) multiples of more than 100. Then came the end of the Japanese bubble…Tokyo shares crashed…and since then, investors have mostly shunned Japanese stocks. Result: While Japan went about rebuilding its economy, the P/E multiples of many Japanese stocks have gradually dropped into the teens.

At these levels, Japanese stocks finally are attractive, says Anthony Cragg—and not only because their prices are relatively low. Many of the companies now have solid balance sheets—and, of course, long histories of producing reliable products that are desired around the world. That makes the stocks attractive at a time when investors are wary of taking risks by investing in new or shaky businesses.

Copying their American competitors, Japanese corporations are taking steps to make their shares more appealing, Cragg says—for example, by buying back their own shares, which increases earnings per share and tends to boost stock prices. In addition, many Japanese companies are raising their dividends. This represents a big change from the past when Japanese companies did little to attract new shareholders. Cragg’s favorite picks now include…

Mitsubishi Corporation (Tokyo Stock Exchange). This trading company buys and sells iron ore, coal, and oil. At a time of rising commodity prices, profits are likely to grow. Recent share price: $29.21.

Nomura Holdings, Inc. (NMR). This is the largest broker and investment manager in Japan. It should do extremely well as the Tokyo exchange rebounds. Recent share price: $14.44.