Edgar Filing: JAPAN EQUITY FUND INC

THE JAPAN EQUITY FUND, INC.
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GENERAL INFORMATION
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THE FUND

The investment objective of the Fund is to outperform over the long term, on
a total return basis (including appreciation and dividends), the Tokyo Stock
Price Index ("TOPIX"), a composite market-capitalization weighted index of all
common stocks listed on the First Section of the Tokyo Stock Exchange ("TSE").
The Fund seeks to achieve its investment objective by investing substantially
all of its assets in equity securities of companies listed on the First or
Second Section of the TSE or listed on the over-the-counter market in Japan or
listed on other stock exchanges in Japan. Daiwa SB Investments (U.S.A.) Ltd. is
the Fund's Investment Manager. Daiwa SB Investments Ltd. is the Fund's
Investment Adviser. The Fund implements an "active" portfolio management policy,
which is an approach that involves quantitative valuation of securities to
identify an appropriate universe of securities from which to select investments,
with judgmental analysis then applied to this universe to determine the actual
investments to be made by the Fund.

SHAREHOLDER INFORMATION

The Fund's shares are listed on the New York Stock Exchange ("NYSE"). The
Fund understands that its shares may trade periodically on certain exchanges
other than the NYSE, but the Fund has not listed its shares on those other
exchanges and does not encourage trading on those exchanges.

The Fund's NYSE trading symbol is "JEQ". Weekly comparative net asset value
("NAV") and market price information about the Fund is published each Monday in
THE WALL STREET JOURNAL, each Sunday in THE NEW YORK TIMES, and each Saturday in
BARRON'S, and also appears in many other newspapers. The Fund's weekly NAV is
also available by visiting www.daiwast.com or calling (800) 933-3440 or
(201) 915-3020. Also, the Fund's website includes a monthly market review and a
list of the Fund's top ten industries and holdings.

INQUIRIES

Inquiries concerning your share account should be directed to PFPC Inc. (the
"Plan Agent") at the number noted below. All written inquiries should be
directed to the Fund, c/o Daiwa Securities Trust Company, One Evertrust Plaza,
9th Floor, Jersey City, New Jersey 07302.

DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN

A Dividend Reinvestment and Cash Purchase Plan (the "Plan") is available to
provide Shareholders with automatic reinvestment of dividends and capital gain
distributions in additional Fund shares. The Plan also allows you to make
optional annual cash investments in Fund shares through the Plan Agent. A
brochure fully describing the Plan's terms and conditions is available from the
Plan Agent by calling (800) 331-1710 or by writing The Japan Equity Fund, Inc.,
c/o PFPC Inc. P.O. Box 43027, Providence, RI 02940-3027.

THE JAPAN EQUITY FUND, INC.
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May 16, 2002
DEAR SHAREHOLDERS:

It is our pleasure on behalf of the Board of Directors to present the
Semi-Annual Report for The Japan Equity Fund, Inc. (the "Fund") for the six
months ended April 30, 2002.

BACKGROUND

The objective of the Fund is to outperform over the long term, on a total
return basis (including appreciation and dividends), the Tokyo Stock Price Index
("TOPIX"). Stock selection in Japan is facilitated by the use of a value screen
applied to all stocks listed on the First and Second Sections of the Tokyo Stock
Exchange ("TSE"), the over-the-counter market in Japan and listed on other stock
exchanges in Japan. The way in which the Fund seeks to meet its objective is to
identify under-valued stocks by examining certain fundamental characteristics of
stocks which are listed on the exchanges listed above. These fundamental
characteristics include, among others, the earnings-to-price ratio and the
book-to-price ratio. This method of stock selection results in a master list of
300 stocks (from a universe of 3,300 stocks) from which stocks are selected for
the Fund in accordance with predetermined sector and size parameters.

PERFORMANCE OF THE JAPANESE STOCK MARKET

During the period from November 1, 2001 to April 30, 2002, the TOPIX rose
2.14% in Yen terms. The stock market movement was characterized by a strong
rebound from the middle of February. The main points in reviewing the market
during the past six months were as follows:

- November: The Tokyo stock market showed mixed movements in November.
Shares of exporters, especially semiconductor-related and large
electronics makers, were favored, as investors welcomed the following
factors: (1) the U.S. and other foreign stock markets showed strong
movements supported by optimism about the U.S. economy; and (2) the Yen's
exchange rate declined against the U.S. Dollar ("USD"). On the other hand,
bank shares plunged amid increasing concerns over the Japanese financial
system, while defensive sectors declined due to profit taking. This offset
the rise in exporter shares.

- December: Investors shied away from investments in shares with high credit
risks, after Enron Corp. and Aoki Corp. collapsed in early December. On
the other hand, exporter shares, especially automobile makers, were
favored amid the Yen's decline against the major currencies. However, this
failed to even out the effect of the decline in shares of banks, trading
concern shares and so on. The economic releases tended to indicate that
the Japanese economy's deterioration was accelerating. The third quarter
Gross Domestic Product ("GDP") figures showed that the economy slid back
into recession for the third time in a decade, led by a 1.7% decline in
consumer spending. Moreover, the Bank of Japan ("BoJ") Tankan Survey
showed that business sentiment sank for the fourth consecutive quarter.
The closely watched Diffusion Index for large manufacturers fell 5 points
to -38, the lowest since March 1999.

- January: The Tokyo stock market plummeted in January, although investor
concerns over potential corporate bankruptcies eased off while the Yen
declined against the USD. Investors shied away from investments in shares
due to the following factors: (1) the supply-demand balance worsened as
banks accelerated the unwinding of their cross-held shares; they sold Y175
billion in the market; (2) investor expectations for accelerated bad-loan
write-offs were sidetracked in the Daiei Inc. restructuring plan

THE JAPAN EQUITY FUND, INC.
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unveiled in mid-month; and (3) investors doubted the feasibility of the
government's reform plans after Prime Minister Koizumi dismissed Foreign
Minister Makiko Tanaka late in the month. The TOPIX recorded a 16-year low
at 964.75 on January 30, 2002.

- February: The stock market plunged due to mounting investor doubt about
the feasibility of the government's reform plans early in February.
However, the key indices were lifted in the latter half of the month
supported by the following factors: (1) the supply-demand balance improved
dramatically mainly due to short-covering done after the government
announced that it would tighten the short-selling regulations;
(2) investor confidence that the U.S. economy has entered into
recovery-mode strengthened as favorable economic figures and some upgrades
of corporate profit forecasts were released. Also there was the belief
that the Japanese economy will be favorably affected by the U.S. economic
rebound; and (3) market participants expected that the government would
act on their reform plans, ahead of the Japan-U.S. talks. Since the middle
of the month, rising discussion about an injection of public funds into
ailing banks boosted investor expectations for imminent action by the
government to help the ailing financial system. This expectation mounted
ahead of G7 and the Japan-U.S. high-level meetings and pushed up the
market. Moreover, the supply-demand balance improved dramatically,
especially later in the month. The Financial Service Agency ("FSA")
tightened up on the short-selling regulations. It announced the
introduction of so-called "up-tick rules" effective on March 6th which
prohibit short selling at a price lower than current price. This
announcement made short-sellers buy back shares to close their
short-positions, while the FSA watched transactions more closely.

- March: The Tokyo stock market rose early in March due to the following
factors: (1) the U.S. stock market showed strong movements supported by
mounting optimism about the economic recovery; (2) the supply-demand
balance remained tight partly due to the continual buybacks by foreign
investors; and (3) there were growing signs that manufacturers, especially
electric component makers, would finish their inventory adjustments. On
March 11th, the TOPIX rose to a seven month-high of 1,125.43, while the
supply-demand balance remained tight after a number of brokerages
recommended upgrading exposure to the Japanese market in their global
equity allocation. This prompted foreign investors to buy Japanese shares
to adjust their under-weighted positions. They bought Y771 billion in the
first week of the month. However, after the Government Pension Investment
Fund (GPIF) announced its investment plans for fiscal year 2002 ("FY2002")
when it would invest Y1.7 trillion into the domestic stock market,
investor optimism about the supply-demand balance decreased since there
were expectations that the amount would be Y2-4 trillion.

- April: The Tokyo stock market showed strong movement in April, although
the U.S. stock market plunged later in the month and the Yen's exchange
rate rose against the USD. The following factors supported the market:
(1) optimistic corporate profit outlooks for FY2002, especially in the
technology sectors, boosted investor expectations for a "V-shaped"
recovery of corporate performances; (2) international demand for Japanese
shares kept supply-demand tight, as foreign investors turned more
favorably to the prospect of a Japanese economic recovery. Meanwhile,
their excessive expectations for the U.S. economic recovery were adjusted
downward; and (3) expectations for a recovery of commodity prices
increased due to the oil price hike and mounting expectations for an
economic recovery.

THE JAPAN EQUITY FUND, INC.
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PERFORMANCE/ATTRIBUTION ANALYSIS

Table 1. Performance in comparison with the benchmark (TOPIX), USD base, as
of April 30, 2002
--------------------------------------------------------------------------------

LATEST 3 MONTHS LATEST 6 MONTHS LATEST 12 MONTHS
% % %
------- ------- -------

Portfolio.............................. 14.74 -1.23 -22.21
Benchmark.............................. 15.30 -2.83 -23.77
Difference............................. -0.56 1.60 1.56

Table 2. Attribution Analysis Summary, Yen base (November 2001 - April 2002)
--------------------------------------------------------------------------------

(%)
------

Portfolio.............................. 3.82
TOPIX.................................. 2.14
Difference............................. 1.68

BREAKDOWN
---------------------------------------

Sector Selection....................... 0.83
Stock Selection........................ 1.14
Others................................. -0.29
------
Total.................................. 1.68

Table 3. Attribution Analysis Breakdown, Yen base (November 2001 -- April
2002)
--------------------------------------------------------------------------------

PORTFOLIO MARKET SECTOR STOCK
WEIGHT WEIGHT SELECTION SELECTION
AVERAGE AVERAGE DERIVE EFFECT EFFECT
(%) (%) WEIGHTING (%) (%)
------ ------ -------- -------- --------

Technology............................. 19.34 18.15 Over 0.21 -0.08
Automobile............................. 9.26 10.36 Under -0.24 -0.43
Machinery.............................. 4.52 3.26 Over 0.14 0.58
Pharmaceutical......................... 6.56 5.26 Over -0.16 0.18
Personal Consumption................... 11.22 9.99 Over -0.01 0.21
Service/Media.......................... 6.53 5.18 Over -0.16 0.47
Construction/Property.................. 3.00 2.90 Over 0.06 0.11
Metal/Glass............................ 3.17 4.36 Under -0.04 -0.46
Chemical/Textile....................... 9.34 7.04 Over 0.17 -0.02
Wholesale/Transportation............... 6.96 7.63 Under 0.07 -0.11
Finance................................ 11.19 13.93 Under 0.39 0.54
Telecom................................ 5.53 7.66 Under 0.11 0.02
Public Utility......................... 3.37 4.29 Under 0.28 0.10
Total.................................. 100.00 100.00 -- 0.83 1.14

THE JAPAN EQUITY FUND, INC.
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COMMENT

As shown in Table 1, the portfolio of the Fund decreased by -1.23% in USD
terms during the six months from November 1, 2001 to April 30, 2002. Over the
same period, the benchmark (TOPIX) lost 2.83% in USD terms. The depreciation of
the Yen against the USD was a negative factor for the absolute return in the
NAV.

Our attribution analysis in Yen base (Table 2) indicates that the
outperformance of 1.68% (3.82% vs. 2.14%) during the period can be attributed to
the positive effects from both sector selection (0.83%) and stock selection
(1.14%).

STOCK SELECTION

The attribution analysis indicates that stocks held in Machinery (0.58%),
Finance (0.54%), and Service/ Media (0.47%) highly contributed to the positive
performance. On the other hand, stocks held in Metal/Glass (-0.46%) and
Automobile (-0.43%) adversely affected performance.

SECTOR SELECTION

The attribution analysis also shows that our underweight stance in Finance
(11.19% vs. 13.93%) and underweight in Public Utility (3.37% vs. 4.29%) had a
positive effect on performance.

OUTLOOK & STRATEGY

We believe there is a reasonable chance that the current stability in the
stock market will continue in the next three to six months, supported by
improving economic data, corporate earnings recovery, policy reform, improved
supply/demand conditions in the stock market, and improved credibility towards
the banking sector. However, the slow pace of structural reform by the
government might ultimately limit the magnitude on the upside. For now, we will
maintain our TOPIX target of 1300 this year (1087 as of May 15).

Better economic data:

Because of the solid demand in the U.S. and other Asian countries, Japanese
export growth has recovered and given the high correlation with industrial
production, our economists predict that a cyclical rebound in production is now
imminent. In the past 30 years, a recovery in industrial production has been
directly correlated with a rise in the stock market.

The combined effect of surprisingly stable personal consumption and net
exports make it quite likely that real GDP will rise in January-March, for the
first time in the last four quarters, despite falls in other sectors, such as
private capital spending. Indeed, the strength of exports suggests that our
current forecast, of minus 0.8% quarter-on-quarter growth, would have to be
revised. This would also potentially set the stage for better GDP growth in
FY2002.

The prospects for the economy should be enough to push the market up for a
while. The news flow from economic data is likely to improve over the next few
months. One area in particular that is likely to improve over the next year or
so is deflation. There are already tentative signs that declines in consumer
prices and the GDP deflator have started slowing, as they did in 1999, when the
economy picked up. For example, consumer prices in Tokyo fell only 0.7%
year-on-year in March, the smallest decline since summer, compared to a maximum
decline of 1.5% in March last year. Due to structural factors, domestic/foreign
price differentials and forthcoming deregulation, we believe that deflation is
unlikely to be eradicated anytime soon. However, we

THE JAPAN EQUITY FUND, INC.
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expect that easing deflation will become a major theme in the stock market in
2002. An easing deflationary pressure should have some positive impact on
corporate earnings, particularly in low-growth sectors, such as retailers.

Corporate earnings recovery:

The same sort of positive news flow should emerge for earnings too. Already,
over the past couple of months, there has been a significant increase in the
number of companies revising their profit forecasts upward. While there are
clearly still more downward than upward revisions, the ratio line does appear to
have bottomed out. The momentum of earnings revisions over the next six months
is expected to continue to be positive.

We believe that the corporate structural reform is progressing solidly and
it should enable corporate profit to achieve strong growth this year. Daiwa
Institute of Research (DIR) expects the aggregate pretax profit to increase by
56% in FY2002, based on the assumption that sales should grow by 0.5%. Nomura
Research Institute (NRI) also estimates 56% profit growth. Both of them contend
that more than 60% of the profit growth will be attributable to the
restructuring/cost cutting efforts by corporations. Moreover, we expect that
profit growth will continue over the next fiscal year, supported by sales growth
of as much as 2% to 3%, and continuous cost-cutting efforts.

Policy reforms:

Discussions of additional policy measures may also provide market support in
the coming months. The current Diet session is expected to end on June 19, 2002
and the major items that are likely to be addressed between now and then include
tax reforms, public fund injections to banks, and expanded monetary easing.
Specifically, the government's Tax Committee is scheduled to release its
blueprint of FY2003 tax reforms in June. Reforms that may be considered include
lowering the marginal income tax rate (currently 50%), reducing inheritance
taxes, and cutting real estate related taxes.

Improved supply/demand conditions:

Supply/demand conditions have clearly improved since early spring as
seasonal selling pressure from unwinding of cross share holdings has abated, and
domestic pension funds have increased their equity positions. Also, it is
noteworthy that share buy-backs by corporations have become active in the past
several months, reflecting management's confidence in their future business
condition and cash flow. This shows management's strong commitment to increasing
shareholder value. In fact, company share-buybacks have amounted to Y1 trillion
during January-March 2002, which reached over 60% of the total share buybacks
for 2001 when share buybacks marked a historic record. As for foreign investors,
while underweight positions have been reduced somewhat this year, we believe
that the majority of Europe, Asia and the Far East (EAFE)-based funds are still
significantly underweight in Japan. Therefore, if the market remains firm going
forward, those foreigners who are still significantly underweighted in Japan and
have yet to participate, may buy.

Improved credibility toward the banking sector:

The results of the FSA's special inspections were announced in April. With
raised FY2001 estimates for bad loan disposals from Y6.4 trillion to Y7.8
trillion by the major banks, we believe that the recognition gap between the
major banks and prudent investors that has caused concerns over the systemic
risk has been largely improved.

THE JAPAN EQUITY FUND, INC.
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Slow pace of structural reform by the government:

While there may be sufficient support for a cyclical rebound, we believe
that in order for the market to enter a sustained bull market, genuine
structural reforms (i.e. rationalization of inefficient industries, broad-based
deregulation, radical moves on privatization of government-affiliated
corporations) would be required. For these reasons, we are comfortable
maintaining a TOPIX target of 1300 this year as of now. If there is sufficient
evidence that such structural reform is accelerating, we should revise our
forecasts accordingly.

Portfolio Strategy:

As for portfolio strategy, we continue to overweight sectors that are
benefiting from the global economic recovery, such as Electric Appliances,
Machinery, and Chemicals. In addition, we are more positive on select retailers
that should benefit from expected eased deflation. On the other hand, we think
it is still too early to increase the weightings for telecommunications where we
need to see signs of further improvement of the fundamentals.

Our core holdings include globally competitive manufacturers. We also stress
less quality companies (but ones nonetheless still highly sensitive to the
industrial production cycle). Furthermore, the portfolio is diversified to
mid-cap value stocks with strong fundamentals.

FUND PERFORMANCE

As of April 30, 2002, the Fund's net assets were approximately $59.6
million, which represents a net asset value of $5.51 per share. The return on
the Fund's net assets was -1.43% since the Fund's fiscal year-end on October 31,
2001. Over the same period, the Benchmark (TOPIX) return was -3.13%, as measured
in U.S. Dollars.

The change in net asset value in U.S. Dollars depends on several factors
such as: (1) the percentage change in the Benchmark during the period; (2) the
over- or under- performance of the Fund's portfolio, after expenses, relative to
the Benchmark; and (3) the change in the Japanese Yen/USD exchange rate.

Our investment strategy is to invest in undervalued securities based on
intensive bottom-up analysis supported by quantitative screening. In our
research efforts, we placed a priority on evaluation of the top management, and
its commitment to enhance shareholders' value through clear-cut strategies,
including restructuring, that will be eventually reflected in share prices. We
add value primarily through a bottom-up stock selection approach for the
fundamental Japan equity product.

It is important to emphasize again that it has not been an objective of the
Fund to predict changes in its Benchmark. Rather, its goal is to outperform the
Benchmark, while staying fairly fully invested. Specifically, the goal is to
hold no more than 5% in cash. On April 30, 2002, the proportion of the Fund's
net assets invested in Japanese equities listed on the First Section of the TSE
was 98.76%, while short-term investments and other net assets represented 1.24%.

The invested position of the Fund's assets consisted of common stocks of
companies operating in 27 different industries. The Fund had relatively large
weightings in Electric Appliances (20.04% of net assets), Transportation
Equipment (9.15%), Chemicals (7.48%), Machinery (5.98%) and Services (5.94%).

THE JAPAN EQUITY FUND, INC.
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During the six months ended April 30, 2002, the Fund's market price on the
New York Stock Exchange ("NYSE") ranged from a low of $4.30 per share on
February 8, 2002 to a high of $6.14 on April 26, 2002. The Fund's NYSE market
price closed at $6.10 per share on April 30, 2002.

The NYSE trading price in relation to the Fund's net asset value per share,
as measured by the weekly closing prices during the six months ended April 30,
2002 ranged from a discount of 15.71% on December 20, 2001 to a premium of
10.71% on April 30, 2002.

The Fund has not invested in derivative securities. Although foreign
currency hedging is permitted by the Fund's prospectus, the Fund has not engaged
in any foreign currency hedging.

PORTFOLIO MANAGEMENT

Mr. Koichi Ogawa, CFA, is the Executive Director and Chief Portfolio Manager
of Daiwa SB Investments Ltd. ("DSBI") for all North American clients. A senior
member of the Investment Policy Committee (IPC) of DSBI, Mr. Ogawa possesses 27
years of investment experience and has been responsible for Japan stock
selection since 1984. He spent nine years with Daiwa Securities as an
institutional research analyst and three years in New York analyzing U.S.
securities. He graduated from Tohoku University with a B.A. in Law in 1972.

Mr. Kazuhiko Hosaka, CMA, is a Senior Portfolio Manager of DSBI, with a
total of 13 years of experience in the Japanese equity market. He joined Daiwa
in 1990 as a portfolio manager after spending two years as a securities analyst
at Barclays Securities Group. He has been directly responsible for managing
Japanese equity portfolios for several North American and European pension
clients. He graduated from Aoyama Gakuin University with a B.A. in Law in 1988.

We thank you for your support of The Japan Equity Fund, Inc. and your
continued interest in the Japanese economy and marketplace.

Sincerely,

/s/ Hiroshi Kimura /s/ Shunsuke Ichijo
HIROSHI KIMURA SHUNSUKE ICHIJO
CHAIRMAN OF THE BOARD PRESIDENT

THE JAPAN EQUITY FUND, INC.
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PORTFOLIO OF INVESTMENTS
APRIL 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

-------------------------------------------
JAPANESE COMMON STOCKS--98.76%
--------------------------------------------------------------------------------

SHARES VALUE
---------- ------------

BANKS--3.92%
177 Mitsubishi Tokyo Financial Group Inc. ................. $ 1,211,140
250,000 The Sumitomo Trust & Banking Co., Ltd. ................ 1,120,971
------------
2,332,111
------------
CHEMICALS--7.48%
210,000 Asahi Kasei Corp. ..................................... 801,028
220,000 Denki Kagaku Kogyo Kabushiki Kaisha ................... 602,834
23,000 Fuji Photo Film Co., Ltd. ............................. 730,500
57,000 Kao Corp. ............................................. 1,113,732
50,000 Konica Corp. .......................................... 320,333
21,500 Shin-Etsu Chemical Co., Ltd. .......................... 885,373
------------
4,453,800
------------
COMMUNICATION--5.50%
280 NTT Corp. ............................................. 1,100,732
860 NTT DoCoMo, Inc. ...................................... 2,175,775
------------
3,276,507
------------
CONSTRUCTION--0.82%
71,000 Sekisui House, Ltd. ................................... 488,035
------------
ELECTRIC APPLIANCES--20.04%
20,000 Canon Inc. ............................................ 765,997
17,200 Fanuc Ltd. ............................................ 953,324
152,000 Fujitsu Ltd. .......................................... 1,206,913
100,000 Hitachi Ltd. .......................................... 740,308
8,500 Kyocera Corp. ......................................... 578,312
61,000 Matsushita Electric Industrial Co., Ltd. .............. 816,752
6,500 Murata Manufacturing Co., Ltd. ........................ 411,373
73,000 NEC Corp. ............................................. 562,588
76,000 Omron Corp. ........................................... 1,143,017

SHARES VALUE
---------- ------------

47,000 Pioneer Corp. ......................................... $ 927,487
4,400 Rohm Co., Ltd. ........................................ 655,924
20,000 Sharp Corp. ........................................... 277,285
29,500 Sony Corp. ............................................ 1,584,540
3,500 Tokyo Electron Ltd. ................................... 251,751
227,000 Toshiba Corp. ......................................... 1,058,485
------------
11,934,056
------------
ELECTRIC POWER & GAS--2.17%
40,000 Kansai Electric Power Co., Inc. ....................... 544,917
24,800 Tokyo Electric Power Co., Inc. ........................ 451,752
125,000 Tokyo Gas Co., Inc. ................................... 298,731
------------
1,295,400
------------
FOODS--2.54%
86,000 Ajinomoto Co., Inc. ................................... 856,251
11,000 Coca-Cola West Japan Co., Ltd. ........................ 194,380
30,000 Katokichi Co., Ltd. ................................... 462,401
------------
1,513,032
------------
GLASS & CERAMIC PRODUCTS--0.77%
65,000 Asahi Glass Co., Ltd. ................................. 460,961
------------
INSURANCE--2.17%
200 Daido Life Insurance Co., Ltd. ........................ 523,120
99 Millea Holdings Inc. .................................. 770,668
------------
1,293,788
------------
IRON & STEEL--0.51%
200,000 Nippon Steel Corp. .................................... 305,153
------------
LAND TRANSPORTATION--2.00%
189 East Japan Railway Co. ................................ 798,902
23,000 Yamato Transport Co., Ltd. ............................ 390,316
------------
1,189,218
------------

THE JAPAN EQUITY FUND, INC.
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PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

JAPANESE COMMON STOCKS (CONTINUED)
--------------------------------------------------------------------------------

SHARES VALUE
---------- ------------

MACHINERY--5.98%
35,000 Amano Corp. ........................................... $ 223,416
30,000 Daikin Industries Ltd. ................................ 544,138
90,000 Komatsu Ltd. .......................................... 325,782
190,000 NSK Ltd. .............................................. 825,315
45,000 Ricoh Co., Ltd. ....................................... 838,977
6,700 SMC Corp. ............................................. 802,164
------------
3,559,792
------------
MARINE TRANSPORTATION--1.75%
510,000 Mitsui O.S.K. Lines, Ltd. ............................. 1,040,168
------------
METAL PRODUCTS--1.05%
45,000 Tostem Inax Holding Corp. ............................. 623,540
------------
NON-FERROUS METALS--0.93%
29,000 Sumitomo Electric Industries, Ltd. .................... 206,562
75,000 The Furukawa Electric Co., Ltd. ....................... 346,801
------------
553,363
------------
OTHER FINANCING BUSINESS--1.23%
54,400 Hitachi Capital Corp. ................................. 733,041
------------
OTHER PRODUCTS--3.23%
6,800 Nintendo Co., Ltd. .................................... 952,826
96,000 Toppan Printing Co., Ltd. ............................. 970,761
------------
1,923,587
------------
PHARMACEUTICAL--4.86%
10,000 Fujisawa Pharmaceutical Co., Ltd. ..................... 244,434
25,000 Ono Pharmaceuticals Co., Ltd. ......................... 817,375
28,000 Takeda Chemical Industries, Ltd. ...................... 1,224,973
22,000 Yamanouchi Pharmaceutical Co., Ltd. ................... 606,259
------------
2,893,041
------------

SHARES VALUE
---------- ------------

PULP & PAPER--0.65%
80,000 Oji Paper Co., Ltd. ................................... $ 389,849
------------
REAL ESTATE--2.03%
79,000 Mitsubishi Estate Co., Ltd. ........................... 571,929
81,000 Mitsui Fudosan Co., Ltd. .............................. 635,591
------------
1,207,520
------------
RETAIL TRADE--5.80%
14,000 Ito-Yokado Co. Ltd. ................................... 689,865
60,000 Marui Co., Ltd. ....................................... 738,907
10,000 Seven-Eleven Japan Co., Ltd. .......................... 374,436
13,000 Skylark Co., Ltd. ..................................... 260,587
129,000 Takashimaya Co., Ltd. ................................. 735,077
61,000 Uny Co., Ltd. ......................................... 654,352
------------
3,453,224
------------
SECURITIES--3.52%
165,000 Nikko Cordial Corp. ................................... 744,979
97,000 Nomura Holdings Inc. .................................. 1,351,627
------------
2,096,606
------------
SERVICES--5.94%
5,000 Fuji Soft Abc Inc. .................................... 180,601
24,000 Namco Ltd. ............................................ 485,754
4,760 Nippon Television Network Corp. ....................... 1,128,305
17,000 Secom Co., Ltd. ....................................... 836,369
55,000 Toho Co., Ltd. ........................................ 628,522
13,000 Tokyo Broadcasting System, Inc. ....................... 276,273
------------
3,535,824
------------
TEXTILE & APPAREL--1.25%
115,000 Kuraray Co., Ltd. ..................................... 747,509
------------
TRANSPORTATION EQUIPMENT--9.15%
61,000 Denso Corp. ........................................... 987,700
55,000 Fuji Heavy Industries Ltd. ............................ 277,440

THE JAPAN EQUITY FUND, INC.
----------------------------------------------------------------------

PORTFOLIO OF INVESTMENTS (CONCLUDED)
APRIL 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

JAPANESE COMMON STOCKS (CONCLUDED)
-------------------------------------------

SHARES VALUE
---------- ------------

28,000 Honda Motor Co., Ltd. ................................. $ 1,255,488
34,800 Toyota Industries Corp. ............................... 559,411
87,000 Toyota Motor Corp. .................................... 2,370,388
------------
5,450,427
------------
WAREHOUSING--1.64%
135,000 Mitsubishi Logistics Corp. ............................ 976,296
------------
WHOLESALE TRADE--1.83%
63,000 Mitsubishi Corp. ...................................... 472,279
45,000 Mitsui & Co., Ltd. .................................... 284,447
35,000 Ryoyo Electro Corp. ................................... 334,306
------------
1,091,032
------------
Total Common Stocks
(Cost--$71,212,085).............................................. 58,816,880
------------

-------------------------------------------
SHORT-TERM INVESTMENTS--0.22%
-------------------------------------------

U.S. DOLLAR TIME DEPOSIT--0.22%

PRINCIPAL
AMOUNT
(000)
----------

$133 Bank of New York Time
Deposit, 0.10%,
due 5/1/02
(Cost--$132,786)...................................... 132,786
------------
Total Investments--98.98%
(Cost--$71,344,872).............................................. 58,949,666
Other assets less liabilities--1.02%............................... 607,747
------------
NET ASSETS (Applicable to 10,815,688 shares of capital stock
outstanding; equivalent to $5.51 per share) 100.00%.............. $ 59,557,413
============

-------------------------------------------
TEN LARGEST COMMON STOCK
CLASSIFICATIONS HELD
APRIL 30, 2002 (UNAUDITED)

-------------------------------------------

PERCENT OF
INDUSTRY NET ASSETS
-------- ----------

Electric Appliances................ 20.04%
Transportation Equipment........... 9.15
Chemicals.......................... 7.48
Machinery.......................... 5.98
Services........................... 5.94
Retail Trade....................... 5.80
Communication...................... 5.50
Pharmaceutical..................... 4.86
Banks.............................. 3.92
Securities......................... 3.52

-------------------------------------------
TEN LARGEST COMMON STOCK
POSITIONS HELD
APRIL 30, 2002 (UNAUDITED)

-------------------------------------------

PERCENT OF
ISSUE NET ASSETS
----- ----------

Toyota Motor Corp.................. 3.98%
NTT DoCoMo, Inc.................... 3.65
Sony Corp.......................... 2.66
Nomura Holdings Inc................ 2.27
Honda Motor Co., Ltd............... 2.11
Takeda Chemical Industries, Ltd.... 2.06
Mitsubishi Tokyo Financial Group
Inc................................ 2.03
Fujitsu Ltd........................ 2.03
Omron Corp......................... 1.92
Nippon Television Network Corp..... 1.89

See accompanying notes to financial statements.

THE JAPAN EQUITY FUND, INC.
----------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

ASSETS
Investment in securities, at value
(cost-$71,344,871)........................ $ 58,949,666
Cash denominated in foreign currency
(cost-$549,666)........................... 549,666
Receivable for securities sold............. 94,472
Interest and dividends receivable.......... 208,833
Prepaid expenses........................... 28,423
------------
Total assets............................. 59,831,060
------------
LIABILITIES
Payable for securities purchased........... 155,332
Accrued expenses and other liabilities..... 118,315
------------
Total liabilities........................ 273,647
------------
NET ASSETS
Capital stock, $0.01 par value per share;
total 30,000,000 shares authorized;
10,815,688 shares issued and
outstanding............................... 108,157
Paid-in capital in excess of par value..... 107,786,826
Accumulated net investment loss............ (187,562)
Accumulated net realized loss on
investments............................... (35,762,334)
Net unrealized depreciation on investments
and other assets and liabilities
denominated in foreign currency........... (12,387,674)
------------
Net assets applicable to shares
outstanding............................. $ 59,557,413
============
NET ASSET VALUE PER SHARE............ $ 5.51
============

See accompanying notes to financial statements.

THE JAPAN EQUITY FUND, INC.
----------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------

INVESTMENT INCOME:
Dividends (net of withholding taxes of
$36,853).................................. $ 208,832
Interest................................... 27
-----------
Total investment income.................. 208,859
-----------
EXPENSES:
Investment management fee.................. 125,983
Administration fee and expenses............ 65,399
Custodian fees and expenses................ 37,442
Audit and tax services..................... 32,381
Directors' fees and expenses............... 31,283
Reports and notices to shareholders........ 27,769
Legal fees and expenses.................... 27,273
Insurance expense.......................... 17,153
Transfer agency fee and expenses........... 7,935
Other...................................... 23,803
-----------
Total expenses........................... 396,421
-----------
NET INVESTMENT LOSS.......................... (187,562)
-----------
REALIZED AND UNREALIZED GAINS FROM INVESTMENT
ACTIVITIES AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized losses on investments......... (6,170,920)
Net realized foreign currency transaction
losses.................................... (111,498)
Net change in unrealized appreciation
(depreciation) on investments in equity
securities................................ 5,503,240
Net change in unrealized appreciation
(depreciation) on other assets and
liabilities denominated in foreign
currency.................................. 12,795
-----------
Net realized and unrealized losses from
investment activities and foreign currency
transactions................................ (766,383)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................. $ (953,945)
===========

See accompanying notes to financial statements.

THE JAPAN EQUITY FUND, INC.
----------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

FOR THE SIX
MONTHS
ENDED FOR THE
APRIL 30, 2002 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2001
-------------- ----------------

INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment loss........................ $ (187,562) $ (376,383)
Net realized loss on:
Investments.............................. (6,170,920) (6,305,436)
Foreign currency transactions............ (111,498) (323,537)
Net change in unrealized appreciation
(depreciation) on:
Investments in equity securities......... 5,503,240 (22,792,438)
Translation of short-term investments and
other assets and liabilities denominated
in foreign currency..................... 12,795 22,836
------------- ---------------
Net decrease in net assets resulting from
operations................................ (953,945) (29,774,958)
------------- ---------------
NET ASSETS:
Beginning of period........................ 60,511,358 90,286,316
------------- ---------------
End of period.............................. $ 59,557,413 $ 60,511,358
============= ===============

See accompanying notes to financial statements.

THE JAPAN EQUITY FUND, INC.
----------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Japan Equity Fund, Inc. (the "Fund") was incorporated in Maryland on
July 12, 1990 under its former name "The Japan Emerging Equity Fund, Inc." and
commenced operations on July 24, 1992. It is registered with the Securities and
Exchange Commission as a closed-end, diversified management investment company.

The following significant accounting policies are in conformity with
generally accepted accounting principles in the United States of America for
investment companies. Such policies are consistently followed by the Fund in the
preparation of its financial statements. The preparation of financial statements
in accordance with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the
amounts and disclosures in the financial statements. Actual reporting results
could differ from those estimates.

VALUATION OF INVESTMENTS--Securities which are listed on the First or Second
Section of the Tokyo Stock Exchange or listed on the over-the-counter market in
Japan or listed on other exchanges in Japan and for which market quotations are
readily available are valued at the last reported sales price available to the
Fund at the close of business on the day the securities are being valued or,
lacking any such sales, at the last available bid price. In instances where
quotations are not readily available or where the price as determined by the
above procedures is deemed not to represent fair market value, fair value will
be determined in such manner as the Board of Directors (the "Board") may
prescribe. Short-term investments having a maturity of 60 days or less are
valued at amortized cost, except where the Board determines that such valuation
does not represent the fair value of the investment. All other securities and
assets are valued at fair value as determined in good faith by, or under the
direction of, the Board.

FOREIGN CURRENCY TRANSLATION--The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities and other assets and liabilities stated in Japanese yen
are translated at the exchange rates prevailing at the end of the period; and
(2) purchases, sales, income and expenses are translated at the rate of exchange
prevailing on the respective dates of such transactions. The resulting exchange
gains and losses are included in the Statement of Operations. The Fund does not
isolate the effect of fluctuations in foreign exchange rates from the effect of
fluctuations in the market price of securities.

TAX STATUS--The Fund intends to continue to distribute substantially all of
its taxable income and to comply with the minimum distribution and other
requirements of the Internal Revenue Code applicable to regulated investment
companies. Accordingly, no provision for federal income or excise taxes is
required.

The Fund is not subject to any Japanese income, capital gains or other taxes
except for withholding taxes on certain income, generally imposed at rates of
10% on interest and 15% on dividends, paid to the Fund by Japanese corporations.

INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
recorded on the trade date (the date upon which the order to buy or sell is
executed). Realized and unrealized gains and losses from security and foreign
currency transactions are calculated on the identified cost basis. Dividend
income and corporate

THE JAPAN EQUITY FUND, INC.
----------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
actions are recorded generally on the ex-date, except for certain dividends and
corporate actions from Japanese securities which may be recorded after the
ex-date, as soon as the Fund acquires information regarding such dividends or
corporate actions. Interest income is recorded on an accrual basis.

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS--The Fund records dividends and
distributions payable to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations, which
may differ from generally accepted accounting principles. These book basis/tax
basis differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax basis treatment;
temporary differences do not require reclassifications. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.

INVESTMENT MANAGER AND INVESTMENT ADVISER

The Fund has an Investment Management Agreement with Daiwa SB Investments
(U.S.A.) Ltd. (the "Manager"). Daiwa SB Investments Ltd. ("DSBI" or the
"Adviser"), an affiliate of the Manager, acts as the Fund's investment adviser
pursuant to an Investment Advisory Agreement between the Manager and DSBI. For
such investment services, the Fund is obligated to pay the Manager a monthly fee
at an annual rate of 0.60% of the first $20 million, 0.40% of the next $30
million and 0.20% of the excess over $50 million of the Fund's average weekly
net assets, of which fee 60% is paid by the Manager to DSBI.

Brokerage commissions of approximately $8,177 were paid by the Fund to Daiwa
Securities America, Inc., an affiliate of both the Manager and DSBI, in
connection with portfolio transactions during the six months ended April 30,
2002. In addition, the Fund has agreed to reimburse the Manager and the Adviser
for all out-of-pocket expenses related to the Fund. For the six months ended
April 30, 2002, there were no out-of-pocket expenses incurred by the Manager or
the Adviser.

At October 31, 2001, the Fund owed $21,207 to the Manager and the Manager
informed the Fund that it owed the Adviser $12,724.

ADMINISTRATOR AND CUSTODIAN AND OTHER RELATED PARTIES

Daiwa Securities Trust Company ("DSTC") an affiliate of the Adviser,
provides certain administrative services to the Fund, for which the Fund pays to
DSTC a monthly fee at an annual rate of 0.20% of the first $60 million of the
Fund's average weekly net assets, 0.15% of the next $40 million and 0.10% of the
excess over $100 million, with a minimum annual fee of $120,000. In addition, as
permitted by the Administration Agreement, the Fund reimburses the Administrator
for its out-of-pocket expenses related to the Fund. During the six months ended
April 30, 2002, expenses of $5,370 were paid to the Administrator, representing
reimburesment to the Administrator of costs relating to the attendance by its
employees at meetings of the Fund's Board.

DSTC also acts as custodian for the Fund's assets and has appointed Sumitomo
Mitsui Banking Corporation, formerly The Sumitomo Bank, Limited (the
"Sub-Custodian"), an affiliate of the Manager, to act as the sub-custodian for
all of the cash and securities of the Fund held in Japan. As compensation for
its services as custodian, DSTC receives a monthly fee and reimbursement of
out-of-pocket expenses. Such expenses include fees and out-of-pocket expenses of
the Sub-Custodian. During the six months ended April 30, 2002, DSTC and the
Sub-Custodian earned $16,018 and $21,424, respectively, as compensation for
custodial service to the Fund.

At April 30, 2002, the Fund owed $10,000 and $3,373 to DSTC for
administration and custodian fees, respectively, excluding fees and expenses of
$2,960 payable to the Sub-Custodian.

During the six months ended April 30, 2002, the Fund paid or accrued $27,273
for legal services in connection with the Fund's on-going operations to a law
firm of which the Fund's Assistant Secretary is a partner.

INVESTMENTS IN SECURITIES AND FEDERAL INCOME TAX MATTERS

For federal income tax purposes, the cost of securities owned at April 30,
2002 was $71,344,754, excluding $132,786 of short-term investments. At
April 30, 2002, the net unrealized depreciation of investments for federal
income tax purposes, excluding short-term securities, of $12,527,875 was
composed of gross appreciation of $1,982,053 for those investments having an
excess of value over cost, and gross depreciation of $14,509,927 for those
investments having an excess of cost over value. For the six months ended
April 30, 2002, total aggregate purchases and sales of portfolio securities,
excluding short-term securities, were $17,807,461 and $17,944,989, respectively.

At October 31, 2001, the Fund had a remaining capital loss carryover of
$29,399,630, of which $6,264,639 expires in the year 2005, $16,909,841 expires
in the year 2006 and $6,225,150 expires in the year 2009.

CAPITAL STOCK

There are 30,000,000 shares of $.01 par value common stock authorized. Of
the 10,815,688 shares of the Fund outstanding at April 30, 2002, Daiwa
Securities America Inc. an affiliate of the Manager, Adviser and DSTC owned
14,532 shares.

THE JAPAN EQUITY FUND, INC.
----------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

Selected data for a share of capital stock outstanding during each period is
presented below:

FOR THE SIX
MONTHS ENDED
APRIL 30, FOR THE YEARS ENDED OCTOBER 31,
2002 ----------------------------------------------------
(UNAUDITED) 2001 2000 1999 1998 1997
------------ -------- -------- -------- -------- --------

Net asset value, beginning of period........ $ 5.59 $ 8.35 $ 9.39 $ 6.08 $ 6.99 $ 10.52
------- ------- ------- ------- ------- -------
Net investment loss......................... (0.01) (0.04) (0.04) (0.01) (0.01) (0.01)
Net realized and unrealized gains (losses)
on investments and foreign
currency transactions...................... (0.07) (2.72) (1.00) 3.32 (0.90) (2.86)
------- ------- ------- ------- ------- -------
Net increase (decrease) in net asset value
resulting from operations.................. (0.08) (2.76) (1.04) 3.31 (0.91) (2.87)
------- ------- ------- ------- ------- -------
Less: dividends and distributions to
shareholders
Net realized gains on investments and
foreign currency transactions............ -- -- -- -- -- (0.66)
------- ------- ------- ------- ------- -------
Net asset value, end of period.............. $ 5.51 $ 5.59 $ 8.35 $ 9.39 $ 6.08 $ 6.99
======= ======= ======= ======= ======= =======
Per share market value, end of period....... $ 6.100 $ 4.990 $ 7.063 $ 9.813 $ 6.875 $ 7.375
======= ======= ======= ======= ======= =======
Total investment return:
Based on market price at beginning and end
of period, assuming reinvestment
of dividends............................. 22.24 % (29.35)% (28.02)% 42.73 % (6.78)% (23.76)%
Based on net asset value at beginning and
end of period, assuming reinvestment
of dividends............................. (1.43)% (33.05)% (11.08)% 54.44 % (13.02)% (28.73)%
Ratios and supplemental data:
Net assets, end of period
(in millions)............................ $ 59.6 $ 60.5 $ 90.3 $101.6 $ 65.8 $ 75.6
Ratios to average net assets of:
Expenses................................ 1.40 %* 1.12 % 0.96 % 1.08 % 1.19 % 1.03 %
Net investment loss..................... (0.66)%* (0.51)% (0.48)% (0.11)% (0.13)% (0.13)%
Portfolio turnover........................ 31.92 % 63.39 % 61.91 % 58.70 % 52.07 % 61.75 %

---------------------------------------------------------------------------
* Annualized.

THE JAPAN EQUITY FUND, INC.
----------------------------------------------------------------------
RESULTS OF ANNUAL MEETING OF STOCKHOLDERS (UNAUDITED)
--------------------------------------------------------------------------------

On June 5, 2002, the Annual Meeting of Stockholders of The Japan Equity
Fund, Inc. (the "Fund") was held and the following matter was voted upon and
passed.

Election of one Class I Director to the Board of Directors of the Fund, to
serve for a term expiring on the date on which the Annual Meeting of
Stockholders is held in the year 2003 and the election of two Class III
Directors to serve for a term expiring on the date on which the Annual Meeting
of Stockholders is held in the year 2005.
NUMBER OF SHARES/VOTES
----------------------

PROXY AUTHORITY
CLASS I VOTED FOR WITHHELD
--------------------- --------- ---------------

Hiroshi Kimura 8,772,805 259,858

CLASS III
---------------------

Austin C. Dowling 8,795,348 237,315
Alfred C. Morley 8,803,698 228,965

In addition to the three Directors re-elected at the Meeting, Martin J.
Gruber, David G. Harmer and Oren G. Shaffer were the other members of the Board
who continued to serve as Directors of the Fund.
----------------------------------------------------------------------
AN IMPORTANT NOTICE CONCERNING OUR PRIVACY POLICY
--------------------------------------------------------------------------------

This Privacy Notice describes the types of non-public information we collect
about you, the ways we safeguard the confidentiality of this information and
when this information may be shared with others. In this Privacy Notice, the
terms "we," "our" and "us" refer to the Fund. The term "you" in this Privacy
Notice refers broadly to all of our individual stockholders (including
prospective and former individual stockholders).

In order to provide you with services, we collect certain non-public
information about you. We obtain this personal information from the following
sources:

- Applications and other forms you submit to us.

- Dealings and transactions with us or others.

We do not disclose any non-public personal information about you to anyone,
except as permitted by law. For instance, so that we may effect transactions
that you request or authorize, we may disclose the information we collect to
companies that perform services on our behalf, such as printers and mailers that
assist us in the distribution of investor materials. These companies will use
this information only for the services for which we hired them, and are not
permitted to use or share this information for any other purpose.

We maintain physical, electronic and procedural security measures that
comply with federal standards to safeguard your non-public personal information.
Access to such information is restricted to those agents of the Fund who are
trained in the proper handling of client information and who need to know that
information in order to provide services to stockholders.

----------------------------------------
BOARD OF DIRECTORS
Hiroshi Kimura, CHAIRMAN
Austin C. Dowling
Martin J. Gruber
David G. Harmer
Alfred C. Morley
Oren G. Shaffer
--------------------------------------------
OFFICERS

Shunsuke Ichijo
PRESIDENT

John J. O'Keefe
VICE PRESIDENT AND TREASURER

Judy Runrun Tu
SECRETARY

Laurence E. Cranch
ASSISTANT SECRETARY
--------------------------------------------
ADDRESS OF THE FUND

c/o Daiwa Securities Trust Company
One Evertrust Plaza, 9th Floor
Jersey City, New Jersey 07302
--------------------------------------------
INVESTMENT MANAGER
Daiwa SB Investments (U.S.A.) Ltd.

INVESTMENT ADVISER
Daiwa SB Investments Ltd.

ADMINISTRATOR AND CUSTODIAN
Daiwa Securities Trust Company

TRANSFER AGENT AND REGISTRAR
PFPC Inc.

LEGAL COUNSEL
Clifford Chance Rogers & Wells LLP

INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
--------------------------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that from time to time the Fund may purchase shares of its
common stock in the open market at prevailing market prices.

This report is sent to shareholders of the Fund for their information. It is not
a prospectus, circular or representation intended for use in the purchase or
sale of shares of the Fund or of any securities mentioned in the report.

The financial information included herein is taken from the records of the Fund
without examination by independent accountants who do not express an opinion
thereon.

SEMI-ANNUAL REPORT
APRIL 30, 2002

-------------------------

[JAPAN EQUITY FUND LOGO]

-------------------------

THE JAPAN EQUITY
FUND, INC.
c/o Daiwa Securities Trust Company
One Evertrust Plaza
Jersey City, New Jersey 07302

INVESTMENT MANAGER
Daiwa SB Investments (U.S.A.) Ltd.

INVESTMENT ADVISER
Daiwa SB Investments Ltd.