The Standard & Poor’s Investment Policy Committee (IPC) has reaffirmed its positive outlook on the Japanese equity market.

The decision comes after the group of senior strategists and economists reflected on recent Japanese equity market volatility, which has led to a 4.5% year-to-date sell-off in the S&P Topix 150 Index, on the heels of its 42% gain in 2005.

The IPC reiterated its bullish 2006 forecast for the S&P Topix 150 Index of 1725, up 9% from Wednesday’s closing level.

The IPC says it believes recent weakness in Japanese equities represents a long-term buying opportunity based on “an end to deflation leading to increased corporate pricing power and the strongest earnings growth in the developed world in 2006” said Alec Young, S&P’s equity market strategist.

He added that, “the recent pullback in the Japanese market represents a healthy pause after last year’s outsized gains and an opportunity for investors to increase their exposure to Japanese equities.”

In addition, Young commented on Wednesday’s announcement of an accounting probe of Japanese internet company, Livedoor Inc., saying, “although noteworthy given Livedoor’s high profile, at this point, there is no reason to believe this incident is indicative of widespread accounting abuses in Japan.”