TOKYO (Nikkei)--Foreign investors have shown confidence in Japan after the massive disaster devastated its northeast, but the lingering uncertainty over the future of Tokyo Electric Power Co. (9501) could test their patience.

Lorne Steinberg, the president of Lorne Steinberg Wealth Management Inc. in Montreal, is preparing to make his first visit to Japan. His company began investing in Japanese firms a year ago, attracted by their rich cash assets. Today, Japanese shares account for a quarter of the assets in his company's value stock fund.

Steinberg increased the fund's Japanese stockholdings after the March 11 earthquake and tsunami. The fund's cash holdings were raised to 85% in mid-March, but the figure has since dropped to around 60%, as the fund bought Japanese stocks, such as midtier machinery manufacturers with solid reputations for their technologies, as well as electronics parts makers.

Steinberg decided to visit Japan for the first time and see for himself if the nation can rise from its biggest disaster since World War II. Other foreign stock and bond investors are also conducting their own research on Japan.

Foreigners bought roughly 1 trillion yen more in Japanese equities than they sold in the two weeks following the disaster.

For those investors, not just the damage caused by the quake but the uncertainty created by Tepco's nuclear crisis is a matter of great interest.

According to some market estimates, Tepco will be hit by as much as several trillion yen in damages due to the accident at the Fukushima Daiichi nuclear power plant. If the number proves accurate, the very survival of Tepco, whose net asset value stands at a little less than 3 trillion yen, could be threatened.

The plunge in Tepco's share price has hit the company's roughly 600,000 individual shareholders, who had counted on dividends and capital gains to sustain their livelihood.

Investment funds can flee quickly. To retain investors, Japan should tap the market for ideas about what to do with Tepco.

Some financial institutions are considering a proposal under which Tepco will establish a compensation fund for victims of the nuclear accident. The government would contribute to the fund as well.

Another idea -- nationalizing Tepco's nuclear power operations -- has been suggested by one market strategist.

Those plans would shield Tepco investors from the uncertainty of nuclear operations or the risk of possibly astronomical liabilities.

It is too early to work out how the costs associated with the nuclear accident should be shared between Tepco, shareholders, bondholders and the government. But it will likely help calm foreign investors' nerves if they can see that sincere efforts are being made to erase the doubts surrounding Tepco' future.

--Translated from an article by senior Nikkei staff writer Ryushiro Kodaira

(The Nikkei April 5 morning edition)