NEW YORK (CNNfn) - Japan fund manager Todd Jacobson is optimistic. Really.
The Tokyo stock market fell more than 3 percent this week after new figures showed that Japan's economy is in a recession. And Jacobson's Warburg Pincus Advisor Small Companies Fund, which earned a robust 329 percent in 1999, is down about 20 percent this year. But Jacobson thinks the numbers are deceiving.
"Technically we're in a recession," Jacobson said. "But if you talk to (Japanese) companies, you're seeing real improvement."
Also in this column: The most popular funds in Fidelity retirement plans; health care funds are under the weather; and some other new winners and losers for the week.
Japan funds were big winners in 1999, and Jacobson's fund was number one on the list, according to fund-tracker Morningstar. But this year, the category is taking a beating, and Jacobson's fund was the second-worst performer among international stock funds for the week ended March 10. His fund is also the third-worst for year-to-date returns.
But Jacobson points out that the new data in Japan don't show the innovations among small businesses, the upswing in Internet technology spending, or the volume and price improvements among steel and oil companies.
"There are definite pockets in Japan that are showing signs of real improvement," Jacobson said. "The economy seems to be showing fairly OK signs of life."
For example, Jacobson is optimistic about Sony, despite a slow start by its PlayStation2 video game console. He likes technology stocks like Tokyo Electron and telecoms like NTT Docomo, the largest cellular operator in Japan, with 60 percent of the market. He also likes all of the brokerage stocks.
"There's been a lot of merger activity," Jacobson said. "Our hope is Japan is entering into a multi-year, sustainable bull market."
Part of the sell-off in recent weeks is that Japan's fiscal year ends March 31 and many businesses close their books at the end of this week.
"We remain pretty upbeat," Jacobson said. "Our thesis all along has been restructuring in Japan. It's not just cost cutting. It's more creative management. It's redefining their business models."
Still, if the volatility is too much for you, financial experts say you may want to consider a diversified Asia fund.
Fidelity Investments, the largest provider of 401(k) savings plans, said this week that Fidelity Magellan Fund was its most popular fund in 401(k), 403(b) and 457 plans in 1999.
Second on the list was Fidelity Aggressive Growth Fund, followed by Fidelity Growth Company Fund, Fidelity Blue Chip Growth Fund, and Fidelity OTC Portfolio.
Remember when health care mutual funds bolted out of the gate in 2000, earning more than 10 percent in a single week? March hasn't been as kind for the category. According to new figures from Morningstar, health-care funds were the worst performer for the week ending March 10. The category lost an average of 4.35 percent.
Financial stock funds were also losers, giving up an average of 2.84 percent.
But as you might guess, technology stock funds were the best performers. The winners among technology funds include Jacob Internet Fund, up 9.81 percent, and Internet Fund, up 7.91 percent. (Jacob left Internet Fund last year to start his own fund).
Mid-cap growth funds also were winners, gaining an average of 2.55 percent. At the top of the list are three PBHG funds, including PBHG New Opportunities Fund, up 11.70 percent for the week. 
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