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Nikkei to Reach 16,000: Pro

Japanese stocks will outperform the global market and the Nikkei could reach 16,000 by the end of 2013, according to Lothar Mentel, the chief investment officer of Paradigm Group.

The Tokyo benchmark index crossed the key 14,000-mark on Tuesday to hit a one-month high, having rallied nearly 9 percent since last Thursday. If the Nikkei hits 16,000, this would top its five-and-a-half year peak of 15,942 points.

"At the moment I expect that Japan will slightly outperform the global markets. If we get to 16,000 by the end of the year I shall be very happy with that," Mentel told CNBC's "Worldwide Exchange".

(Read More: Is the Nikkei Getting Its Mojo Back?)

Mentel added that the Nikkei's highs in mid-May had forced him to briefly pull out of Japan. Japanese shares soared over 80 percent between November 2012 and May 2013, before plummeting 20 percent in the weeks leading to June 17.

"We found in the middle of May that Japanese equities had gone a little bit ahead of what we expected in terms of valuations... so we got out of Japan," he said.

"We didn't expect them to correct quite so quickly, but now that they've fallen 20 percent — or after the last couple of days, not quite 20 percent anymore — we feel valuations are at a fairer level, and with everything the Japanese government is undertaking at the moment, we see Japan as an attractive place to invest."

(Read More: Is the Nikkei Rebound for Real?)

In addition, Mentel said the global market uncertainty regarding when the U.S. Federal Reserve will start tapering off its bond purchases was overdone.

"We very much see that whole debate as a little bit overblown," Mentel said. "I think Ben Bernanke will have been a bit surprised himself how much monetary tightening he created with just with a few words."

"We think it was a bit of overshooting, and that's why we balanced our portfolios last week, went back and doubled up on equities, and went back into Japan as well," he said.

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