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 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 07302-3051.

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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A brief summary of the material aspects of the Plan follows:

WHO CAN PARTICIPATE IN THE PLAN? If you wish to participate and your shares
are held in your name, you may elect to become a direct participant in the Plan
by completing and mailing the Enrollment Authorization form on the back cover of
the Dividend Reinvestment and Cash Purchase Plan Brochure available from the
Plan Agent. However, if your shares are held in the name of a brokerage firm,
bank or nominee, you should instruct your nominee to participate in the Plan on
your behalf. If your nominee is unable to participate in the Plan for you, you
should request that your shares be registered in your name, so that you may
elect to participate directly in the Plan.

MAY I WITHDRAW FROM THE PLAN? If your shares are held in your name and you
wish to receive all dividends and capital gain distributions in cash rather than
in shares, you may withdraw from the Plan without penalty at any time by
contacting the Plan Agent. If your shares are held in nominee name, you should
be able to withdraw from the Plan without a penalty at any time by sending
written notice to your nominee. If you withdraw, you or your nominee will
receive a share certificate for all full shares or, if you wish, the Plan Agent
will sell your shares and send you the proceeds, after the deduction of
brokerage commissions. The Plan Agent will convert any fractional shares to cash
at the then-current market price and send to you a check for the proceeds.

HOW ARE THE DIVIDENDS AND DISTRIBUTIONS REINVESTED? If the market price of
the Fund's shares on the payment date should equal or exceed their net asset
value per share, the Fund will issue new shares to you at the higher of net
asset value or 95% of the then-current market price. If the market price is
lower than net asset value per share, the Fund will issue new shares to you at
the market price. If the dividends or distributions are declared and payable as
cash only, you will receive shares purchased for you by the Plan Agent on the
NYSE or otherwise on the open market to the extent available.

WHAT IS THE CASH PURCHASE FEATURE? The Plan participants have the option of
making annual investments in Fund shares through the Plan Agent. You may invest
any amount from $100 to $3,000 annually. The Plan Agent will purchase shares for
you on the NYSE or otherwise on the open market on or about February 15th of
each year. Plan participants should send voluntary cash payments to be received
by the Plan Agent approximately ten days before the annual purchase date. The
Plan Agent will return any cash payments received more than thirty days prior to
the purchase date. You may withdraw a voluntary cash payment by written notice,
if the notice is received by the Plan Agent not less that two business days
before the purchase date.

IS THERE A COST TO PARTICIPATE? There are no Plan charges or brokerage
charges for shares issued directly by the Fund. However, each participant will
pay a pro rata portion of brokerage commissions for shares purchased on the NYSE
or on the open market by the Plan Agent.

WHAT ARE THE TAX IMPLICATIONS? The automatic reinvestment of dividends and
distributions does not relieve you of any income tax which may be payable (or
required to be withheld) on such dividends and distributions. In addition, the
Plan Agent will reinvest dividends for foreign participants and for any
participant subject to federal backup withholding after the deduction of the
amounts required to be withheld.

PLEASE NOTE THAT, IF YOU PARTICIPATE IN THE PLAN THROUGH A BROKERAGE
ACCOUNT, YOU MAY NOT BE ABLE TO CONTINUE AS A PARTICIPANT IF YOU TRANSFER THOSE
SHARES TO ANOTHER BROKER. CONTACT YOUR BROKER OR NOMINEE OR THE PLAN AGENT TO
ASCERTAIN WHAT IS THE BEST ARRANGEMENT FOR YOU TO PARTICIPATE IN THE PLAN.

THE JAPAN EQUITY FUND, INC.
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December 4, 2002
DEAR SHAREHOLDERS:

It is our pleasure on behalf of the Board of Directors to present the Annual
Report for The Japan Equity Fund, Inc. (the "Fund") for the fiscal year ended
October 31, 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"). With this investment objective, the Fund is permitted to invest in
companies in the financial services sector of the 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

Over the period from November 2001 to October 2002, the TOPIX first section
declined by -18.61%. The stock market movement was characterized by the
combination of a strong rebound from the middle of February and a continuous
decline from June. The main points in reviewing the market during the months
were as follows:

- November 01: The Tokyo stock market showed mixed movements in November
2001. 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
movement supported by optimism about the U.S. economy; and (2) the Yen's
exchange rate declined against the U.S. Dollar. On the other hand, bank
shares plunged amid increasing concerns over the Japanese financial
system, while defensive sectors declined due to profit-taking. As a
result, this wiped out the hike in exporter shares.

- December 01: 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 bank shares,
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 02: The Tokyo stock market plummeted in January 2002, although
investor concerns over potential corporate bankruptcies eased off, while
the Yen declined against the dollar. Investors shied

THE JAPAN EQUITY FUND, INC.
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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 175 billion Yen in the market; (2) investor
expectations for accelerated bad-loan write-offs were sidetracked in the
Daiei Inc. restructuring plan unveiled mid-month; and (3) investors have
doubted the feasibility of the government's reform plans, after Prime
Minister Koizumi dismissed Foreign Minister Makiko Tanaka late in the
month. The TOPIX Index recorded a 16-year low at 964.75 on January 30.

- February 02: The market plunged due to mounting investor doubts about the
feasibility of the government's reform plans. However, the key indices
were lifted in latter February, supported by the following factors:
(1) the supply-demand balance improved dramatically mainly due to the
short-covering done after the government announced that it would tighten
the short-selling regulations; (2) investor confidence that the U.S.
economy had already 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 a public funds injection 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 the so-called
"up-tick rules" effective on March 6, which prohibits short selling at a
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 02: The stock market gained early in March 2002 due to the following
factors: (1) the U.S. stock markets showed strong movement 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 inventory adjustments. On
March 11, the TOPIX rose to a seven month high of 1,125.43. The
supply-demand balance remained tight after a number of brokerages
recommended upgrading exposure to the Japanese market in the global equity
allocation. This prompted foreign investors to buy back Japanese shares to
adjust their under-weight positions. They bought 771 billion Yen in the
first week of the month. However, after the Government Pension Benefit
Fund ("GPBF") announced its investment plans for fiscal year 2002
("FY2002"), where it would invest 1.7 trillion Yen into the domestic stock
market, investor optimism about the supply-demand balance decreased since
there were expectations that the amount would be 2-4 trillion Yen.

- April 02: The stock market showed a strong movement, although the U.S.
stock market plunged later in the month and the Yen's exchange rate rose
against the U.S. Dollar. 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

THE JAPAN EQUITY FUND, INC.
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excessive expectations for the U.S. economic recovery were adjusted
downward; and (3) expectations for a recovery in commodity prices
increased due to the oil price hike and mounting expectations for an
economic recovery.

- May 02: The Tokyo stock market maintained strong movement for two
consecutive months, although exporters declined as the U.S. stock market
plunged and the Yen's exchange rate rose sharply against the U.S. Dollar.
On the other hand, domestic-demand-related shares were favored, while
investors' expectations increased for Japan's economic recovery ahead of
the release of the first quarter GDP figures. In addition, the following
factors supported the market: (1) foreign investors sought after Japanese
shares continually, as expectations for a Japanese economic recovery
percolated through, while some disappointment to the U.S. economic
releases were seen; (2) many companies announced buy-back plans for the
FY2002. Investors expected this move would absorb the selling pressure
from the banks' unwinding of cross-held shares; and (3) investor concerns
about a possible plunge in the market receded, while The TOPIX Banks
sub-index rebounded drastically, partly due to a number of positive
recommendations from brokerages.

- June 02: The Tokyo stock market fell by 8.5%, although a sustained
economic recovery was under way. The following factors pushed the market
down: (1) U.S stock market fell; (2) Yen's exchange rate rose sharply
against the dollar; and (3) foreign investors turned net sellers of
Japanese shares for the first time in ten weeks. Investor confidence in
the domestic economic recovery was boosted, as the government declared
that the economy already hit a bottom. On June 28, the Economic Planning
Agency reported that industrial production rose by 3.9% in May from a
month ago. This strong gain was caused by exporters, like machinery, steel
and electric equipment companies. The share prices of these exporters
fell, however, pressured by the strong Yen which threatens overseas
earnings and makes exports less competitive.

- July 02: The Tokyo stock market lost ground for the second month in a row,
as the Nikkei225 average dropped below 10,000 to a five-month low. The
following factors pushed the market down: (1) U.S. stock market fell
sharply; (2) concerns over earnings outlook depressed investor sentiment;
and (3) foreign investors aggressively sold Japanese shares. The Nikkei225
regained 11,000 in early July, as favorable economic indicators, such as
May machinery orders and diffusion indices underpinned the rally. However,
the market reversed its direction in the middle of the month, forced by
heavy selling of foreign investors who were likely to be obliged by the
redemption of U.S. mutual funds.

- August 02: The Tokyo stock market declined 2.4%. The Nikkei225 regained
10,000 on August 26 on the back of the rally in the U.S. stock market.
However, the market declined at the month end because (1) index futures
selling and the unwinding of crossheld shares; and (2) concerns over the
outlook for the semiconductor industry. Index futures selling, which
appeared to be related to the launch of Exchange Traded Funds ("ETF") put
a cap on the market. Banks and some insurance companies were assumed to
provide their holding stocks to ETFs, for the reduction of their equity
exposures. Also, a brokerage was said to have sold index futures in order
to hedge its position against the ETFs.

- September 02: The TOPIX closed 2.2% lower at 921.05, while the Nikkei225
declined 2.5% to 9,383.29. A sharp fall of the U.S. stock market and an
increasing possibility in the downgrade of

THE JAPAN EQUITY FUND, INC.
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economic and earnings forecast dampened the market. On the other hand, a
weaker Yen and the expectation for government measures supported investor
sentiment. On September 18, the BoJ's announcement that it would buy
shares held by other major banks boosted investor sentiment. However, the
sentiment cooled down almost immediately, due to the lack of the swift
follow-up action by the government. Foreign investors remained major
sellers throughout the month and banks accelerated the pace of unwinding
crossheld shares to some extent. However, the selling pressure was mostly
offset by the huge buying rumored to be done by the public pension fund.
Corporate share buybacks were also visible.

- October 02: The Nikkei225 declined by 7.9% to 8,397.03, while the TOPIX
closed 6.4% lower at 862.24. Early in the month, the market fell sharply
because of growing concerns over the deflation pressure as a result of
heightened prospects for the accelerated disposal of bad loans as well as
on-going foreign investor selling. After the post-bubble-low was touched
on October 10, the market stopped falling as U.S. stocks rebounded.
However, the market's upside was limited due to the controversy over the
government package that was released at the end of the month. The anti-
deflation package announced on October 30 did not offer any surprises
while "Takenaka's Bad-loan plan" was not as draconic as originally
planned. Though there was nothing to stimulate the market sentiment in
this announcement, the market did not show much negative reaction because
it was already discounted by share prices. Interim results were generally
better than expected. However, they failed to send the market upward,
since major electronics companies, the mainstay of the market, downgraded
their earnings forecasts for the second half.

FUND PERFORMANCE

As of October 31, 2002, the Fund's net assets were approximately
$49.1 million, which represents a net asset value of $4.54 per share. The return
on the Fund's net assets was -18.78% since the Fund's fiscal year ended on
October 31, 2001. Over the same period, the Benchmark TOPIX return was -19.17%,
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/U.S. Dollar 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 place 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 October 31, 2002, the proportion of the Fund's
net assets invested in Japanese equities listed on the First Section of the TSE
was 97.76%, while short-term investments and other net assets represented 2.24%.

THE JAPAN EQUITY FUND, INC.
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The invested position of the Fund's assets consisted of common stocks of
companies operating in 26 different industries. The Fund had relatively large
weightings in Electric Appliances (19.86% of net assets), Transportation
Equipment (10.48%), Pharmaceuticals (6.85%) and Chemicals (6.14%).

During the fiscal year ended October 31, 2002, the Fund's market price on
the New York Stock Exchange ("NYSE") ranged from a low of $3.88 per share on
October 9, 2002 to a high of $6.99 on May 28, 2002. The Fund's NYSE market price
closed at $4.15 per share on October 31, 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 fiscal year ended October
31, 2002 ranged from a discount of 15.71% on December 20, 2001 to a premium of
14.29% on May 23, 2002, and ended the period at a discount of 8.59%.

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), Mr. Ogawa possesses 28 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, with a total of 14
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
OCTOBER 31, 2002
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JAPANESE COMMON STOCKS--97.76%
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SHARES VALUE
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BANKS--5.28%
157 Mitsubishi Tokyo Financial Group
Inc. ............................. $ 1,022,522
205,000 The Sumitomo Trust & Banking Co.,
Ltd.* ............................ 935,768
420 UFJ Holdings, Inc.* ............... 633,355
------------
2,591,645
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CHEMICALS--6.14%
230,000 Asahi Kasei Corp. ................. 509,945
35,000 Fuji Photo Film Co., Ltd. ......... 964,297
25,000 Kao Corp. ......................... 570,590
31,500 Shin-Etsu Chemical Co., Ltd. ...... 970,574
------------
3,015,406
------------
COMMUNICATION--5.76%
100 KDDI Corp. ........................ 293,446
280 NTT Corp. ......................... 1,024,780
820 NTT DoCoMo, Inc.* ................. 1,510,597
------------
2,828,823
------------
CONSTRUCTION--0.91%
80,000 JGC Corp. ......................... 445,386
------------
ELECTRIC APPLIANCES--19.86%
27,000 Canon Inc. ........................ 994,783
17,200 Fanuc Ltd. ........................ 679,980
180,000 Hitachi Ltd. ...................... 702,804
13,000 Kyocera Corp. ..................... 765,080
116,000 Matsushita Electric Industrial Co.,
Ltd. ............................. 1,214,085
155,000 Matsushita Electric Works, Ltd. ... 940,006
60,000 Pioneer Corp. ..................... 1,022,171
8,000 Rohm Co., Ltd. .................... 1,006,195
60,000 Sharp Corp. ....................... 503,750
41,500 Sony Corp. ........................ 1,782,727

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

57,000 Toshiba Corp.* .................... $ 142,639
------------
9,754,220
------------
ELECTRIC POWER & GAS--2.62%
60,000 Kansai Electric Power Co., Inc. ... 848,060
150,000 Tokyo Gas Co., Inc. ............... 437,724
------------
1,285,784
------------
FOODS--1.80%
46,000 Ajinomoto Co., Inc. ............... 471,324
30,000 Katokichi Co., Ltd. ............... 410,825
------------
882,149
------------
GLASS & CERAMIC PRODUCTS--1.98%
163,000 Asahi Glass Co., Ltd. ............. 973,908
------------
INSURANCE--1.17%
100 Daido Life Insurance Co., Ltd.* ... 202,152
90,000 Mitsui Sumitomo Insurance Co.,
Ltd. ............................. 373,410
------------
575,562
------------
IRON & STEEL--1.73%
350,000 Nippon Steel Corp. ................ 399,413
123,700 Tokyo Steel Manufacturing Co.,
Ltd. ............................. 452,733
------------
852,146
------------
LAND TRANSPORTATION--2.88%
120 East Japan Railway Co. ............ 545,810
61,000 Yamato Transport Co., Ltd. ........ 867,664
------------
1,413,474
------------
MACHINERY--4.47%
330,000 Komatsu Ltd. ...................... 1,051,761

THE JAPAN EQUITY FUND, INC.
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PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2002
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JAPANESE COMMON STOCKS (CONTINUED)
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SHARES VALUE
---------- ------------

MACHINERY (CONCLUDED)

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

210,000 Mitsubishi Heavy Industries,
Ltd. ............................. $ 445,060
290,000 NSK Ltd. .......................... 697,343
------------
2,194,164
------------
MARINE TRANSPORTATION--2.15%
610,000 Mitsui O.S.K. Lines, Ltd.* ........ 1,054,125
------------
METAL PRODUCTS--1.23%
45,000 Tostem Inax Holding Corp. ......... 605,233
------------
NON-FERROUS METALS--0.92%
89,000 Sumitomo Electric Industries,
Ltd. ............................. 451,239
------------
OTHER FINANCING BUSINESS--1.33%
54,400 Hitachi Capital Corp. ............. 652,729
------------
OTHER PRODUCTS--2.06%
136,000 Toppan Printing Co., Ltd. ......... 1,009,912
------------
PHARMACEUTICAL--6.85%
45,000 Fujisawa Pharmaceutical Co.,
Ltd. ............................. 873,003
28,000 Takeda Chemical Industries,
Ltd. ............................. 1,161,722
105,000 Tanabe Seiyaku Co., Ltd. .......... 890,121
18,000 Yamanouchi Pharmaceutical Co.,
Ltd. ............................. 440,169
------------
3,365,015
------------
REAL ESTATE--3.30%
134,000 Mitsubishi Estate Co., Ltd. ....... 1,000,522
81,000 Mitsui Fudosan Co., Ltd. .......... 619,979
------------
1,620,501
------------

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

RETAIL TRADE--4.47%
28,000 Ito-Yokado Co. Ltd. ............... $ 871,862
78,000 Marui Co., Ltd. ................... 723,541
61,000 Uny Co., Ltd. ..................... 597,669
------------
2,193,072
------------
SECURITIES--2.76%
60,000 Nikko Cordial Corp. ............... 240,137
97,000 Nomura Holdings Inc. .............. 1,114,852
------------
1,354,989
------------
SERVICES--3.78%
10,000 Fuji Soft Abc Inc. ................ 150,799
14,000 Konami Co., Ltd. .................. 333,225
4,760 Nippon Television Network Corp. ... 772,123
17,000 Secom Co., Ltd. ................... 600,016
------------
1,856,163
------------
TEXTILE & APPAREL--0.62%
60,000 Kuraray Co., Ltd. ................. 304,695
------------
TRANSPORTATION EQUIPMENT--10.48%
61,000 Denso Corp. ....................... 971,087
26,000 Honda Motor Co., Ltd. ............. 930,388
28,600 Shimano Inc. ...................... 420,794
60,800 Toyota Industries Corp. ........... 907,440
79,000 Toyota Motor Corp. ................ 1,918,976
------------
5,148,685
------------
WAREHOUSING--1.00%
100,000 Mitsubishi Logistics Corp. ........ 493,153
------------
WHOLESALE TRADE--2.21%
133,000 Mitsubishi Corp. .................. 829,353

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

PORTFOLIO OF INVESTMENTS (CONCLUDED)
OCTOBER 31, 2002
--------------------------------------------------------------------------------

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

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

35,000 Ryoyo Electro Corp. ............... $ 255,910
------------
1,085,263
------------
Total Common Stocks
(Cost--$63,381,550).......................... 48,007,441
------------

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SHORT-TERM INVESTMENTS--0.19%
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PRINCIPAL
AMOUNT
(000)
----------

U.S. DOLLAR TIME DEPOSIT--0.19%
92 Bank of New York Time Deposit,
0.10%, due 11/1/02
(Cost--$92,303)................... 92,304
------------
Total Investments--97.95%
(Cost--$63,473,853).......................... 48,099,745

Other assets less liabilities--2.05%........... 1,006,526
------------

NET ASSETS (Applicable to 10,815,688 shares of
capital stock outstanding; equivalent to
$4.54 per share) 100.00%..................... $ 49,106,271
============

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

* Non-income producing securities.

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TEN LARGEST COMMON STOCK
CLASSIFICATIONS HELD
OCTOBER 31, 2002
-------------------------------------------

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

Electric Appliances................ 19.86%
Transportation Equipment........... 10.48
Pharmaceutical..................... 6.85
Chemicals.......................... 6.14
Communication...................... 5.76
Banks.............................. 5.28
Machinery.......................... 4.47
Retail Trade....................... 4.47
Services........................... 3.78
Real Estate........................ 3.30

-------------------------------------------
TEN LARGEST COMMON STOCK
POSITIONS HELD
OCTOBER 31, 2002
-------------------------------------------

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

Toyota Motor Corp. ................ 3.91%
Sony Corp. ........................ 3.63
NTT DoCoMo, Inc. .................. 3.08
Matsushita Electric Industrial Co.,
Ltd. .............................. 2.47
Takeda Chemical
Industries, Ltd. .................. 2.37
Nomura Holdings Inc. .............. 2.27
Mitsui O.S.K. Lines, Ltd. ......... 2.15
Komatsu Ltd. ...................... 2.14
NTT Corp. ......................... 2.09
Mitsubishi Tokyo Financial
Group Inc. ...................... 2.08

See accompanying notes to financial statements.

THE JAPAN EQUITY FUND, INC.
----------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2002
--------------------------------------------------------------------------------

ASSETS
Investment in securities, at value
(cost--$63,473,853)....................... $ 48,099,745
Cash denominated in foreign currency
(cost--$904,740).......................... 907,207
Interest and dividends receivable.......... 170,421
Prepaid expenses........................... 29,656
------------
Total assets............................. 49,207,029
------------
LIABILITIES
Accrued expenses and other liabilities..... 100,758
------------
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..... 107,282,946
Accumulated net realized loss on
investments............................... (42,913,208)
Net unrealized depreciation on investments
and other assets and liabilities
denominated in foreign currency........... (15,371,624)
------------
Net assets applicable to shares
outstanding............................. $ 49,106,271
============
NET ASSET VALUE PER SHARE............ $ 4.54
============

See accompanying notes to financial statements.

THE JAPAN EQUITY FUND, INC.
----------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2002
--------------------------------------------------------------------------------

INVESTMENT INCOME:
Dividends (net of withholding taxes of
$69,761).................................. $ 395,310
Interest................................... 87
------------
Total investment income.................. 395,397
------------
EXPENSES
Investment management fee and expenses..... 258,108
Administration fee and expenses............ 128,445
Custodian fees and expenses................ 77,573
Audit and tax services..................... 71,700
Legal fees and expenses.................... 68,203
Directors' fees and expenses............... 59,558
Reports and notices to shareholders........ 53,219
Insurance expense.......................... 35,571
Transfer agency fee and expenses........... 15,513
Other...................................... 49,433
------------
Total expenses........................... 817,323
------------
NET INVESTMENT LOSS.......................... (421,926)
------------
REALIZED AND UNREALIZED GAINS FROM INVESTMENT
ACTIVITIES AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized losses on investments......... (13,433,292)
Net realized foreign currency transaction
losses.................................... (81,954)
Net change in unrealized appreciation
(depreciation) on investments in equity
securities................................ 2,524,336
Net change in unrealized appreciation
(depreciation) on other assets and
liabilities denominated in foreign
currency.................................. 7,749
------------
Net realized and unrealized losses from
investment activities and foreign currency
transactions................................ (10,983,161)
------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................. $(11,405,087)
============

See accompanying notes to financial statements.

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

FOR THE
YEARS ENDED
OCTOBER 31,
--------------------------------
2002 2001
---------------- ------------

INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment loss........................ $ (421,926) $ (376,383)
Net realized loss on:
Investments.............................. (13,433,292) (6,305,436)
Foreign currency transactions............ (81,954) (323,537)
Net change in unrealized appreciation
(depreciation) on:
Investments in equity securities......... 2,524,336 (22,792,438)
Translation of short-term investments and
other assets and liabilities denominated
in foreign currency..................... 7,749 22,836
--------------- ------------
Net decrease in net assets resulting from
operations................................ (11,405,087) (29,774,958)
NET ASSETS:
Beginning of year.......................... 60,511,358 90,286,316
--------------- ------------
End of year................................ $ 49,106,271 $ 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 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 tax purposes 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 $18,721 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 year ended October 31, 2002. In addition, the
Fund has agreed to reimburse the Manager and the Adviser for all out-of-pocket
expenses related to the Fund. During the year ended October 31, 2002, expenses
of $4,810 were paid to the Adviser, representing reimbursement to the Adviser of
costs relating to the attendance by its employees at meetings of the Fund's
Board.

At October 31, 2002, the Fund owed $20,012 to the Manager and the Manager
informed the Fund that it owed the Adviser $12,007.

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 year ended
October 31, 2002, expenses of $7,849 were paid to the Administrator,
representing reimbursement to the Administrator of costs relating to the
attendance by its employees at meetings of the Fund's Board.

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

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 year ended October 31, 2002, DSTC and the
Sub-Custodian earned $31,698 and $45,875, respectively, as compensation for
custodial service to the Fund.

At October 31, 2002, the Fund owed $10,000 and $2,219 to DSTC for
administration and custodian fees, respectively, excluding fees and expenses of
$3,266 payable to the Sub-Custodian.

During the year ended October 31, 2002, the Fund paid or accrued $68,203 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 October 31,
2002 was substantially the same as the cost of securities for financial
statement purposes. At October 31, 2002, the net unrealized depreciation of
investments for federal income tax purposes, excluding short-term securities, of
$15,374,108 was composed of gross appreciation of $185,752 for those investments
having an excess of value over cost, and gross depreciation of $15,559,860 for
those investments having an excess of cost over value. For the year ended
October 31, 2002, total aggregate purchases and sales of portfolio securities,
excluding short-term securities, were $45,252,412 and $42,958,104, respectively.

In order to present accumulated net investment loss and accumulated net
realized loss on investments on the Statement of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital in excess of par value, accumulated net investment loss and
accumulated net realized loss on investments.

For the year ended October 31, 2002, the adjustments were to decrease
accumulated net investment loss by $421,926, decrease accumulated net realized
loss on investments by $81,954 and decrease paid-in-capital in excess of par by
$503,880, primarily relating to the Fund's net operating loss for the year ended
October 31, 2002 and the reclassification of realized foreign currency losses.
Net investment income, net realized losses and net assets were not affected by
this change.

At October 31, 2002, the Fund had a remaining capital loss carryover of
$42,874,512, of which $6,264,639 expires in the year 2005, $16,909,841 expires
in the year 2006, $6,225,150 expires in the year 2009 and $13,474,882 expires in
the year 2010 available to offset future net capital gains.

As of October 31, 2002, the Fund had no distributable earnings.

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 October 31, 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 year is
presented below:

2002 2001 2000 1999 1998
-------- -------- -------- -------- --------

Net asset value, beginning of year....................... $ 5.59 $ 8.35 $ 9.39 $ 6.08 $ 6.99
------- ------- ------- ------- -------
Net investment loss...................................... (0.04) (0.04) (0.04) (0.01) (0.01)
Net realized and unrealized gains (losses) on investments
and foreign currency transactions....................... (1.01) (2.72) (1.00) 3.32 (0.90)
------- ------- ------- ------- -------
Net increase (decrease) in net asset value resulting
from operations......................................... (1.05) (2.76) (1.04) 3.31 (0.91)
------- ------- ------- ------- -------
Net asset value, end of year............................. $ 4.54 $ 5.59 $ 8.35 $ 9.39 $ 6.08
======= ======= ======= ======= =======
Per share market value, end of year...................... $ 4.150 $ 4.990 $ 7.063 $ 9.813 $ 6.875
======= ======= ======= ======= =======
Total investment return:
Based on market price at beginning and end of year..... (16.83)% (29.35)% (28.02)% 42.73 % (6.78)%
Based on net asset value at beginning and end
of year............................................... (18.78)% (33.05)% (11.08)% 54.44 % (13.02)%
Ratios and supplemental data:
Net assets, end of year (in millions).................. $ 49.1 $ 60.5 $ 90.3 $101.6 $ 65.8
Ratios to average net assets of:
Expenses............................................. 1.44 % 1.12 % 0.96 % 1.08 % 1.19 %
Net investment loss.................................. (0.74)% (0.51)% (0.48)% (0.11)% (0.13)%
Portfolio turnover..................................... 76.19 % 63.39 % 61.91 % 58.70 % 52.07 %

THE JAPAN EQUITY FUND, INC.
----------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------

To The Shareholders and
Board of Directors of
The Japan Equity Fund, Inc.

In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Japan Equity Fund, Inc. (the
"Fund") at October 31, 2002, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 2002 by
correspondence with the custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
December 27, 2002

THE JAPAN EQUITY FUND, INC.
----------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
--------------------------------------------------------------------------------

The Fund is required by Subchapter M of the Internal Revenue Code of 1986,
as amended, to advise you within 60 days of the Fund's fiscal year end
(October 31, 2002) as to the federal tax status of distributions received by you
during such fiscal year. There were no dividend payments or foreign tax credits
with respect to the fiscal year 2002.

SHAREHOLDERS ARE STRONGLY ADVISED TO CONSULT THEIR OWN TAX ADVISERS WITH
RESPECT TO THE TAX CONSEQUENCES OF THEIR INVESTMENT IN THE FUND.

THE JAPAN EQUITY FUND, INC.
----------------------------------------------------------------------
INFORMATION CONCERNING DIRECTORS AND OFFICERS
--------------------------------------------------------------------------------

The following table sets forth information concerning each of the Directors
and Officers of the Fund. The Directors of the Fund will serve for terms
expiring on the date of subsequent Annual Meetings of Stockholders in the year
2003 for Class I Directors, 2004 for Class II Directors and 2005 for Class III
Directors, or until their successors are duly elected and qualified.

NUMBER OF
FUNDS IN
PRINCIPAL OCCUPATION FUND
OR EMPLOYMENT DURING PAST COMPLEX FOR
FIVE YEARS AND DIRECTOR OR WHICH
NAME (AGE) AND ADDRESS DIRECTORSHIPS IN OFFICER OF DIRECTOR
OF DIRECTORS/OFFICERS PUBLICLY HELD COMPANIES FUND SINCE SERVES (1)
--------------------------- ---------------------------------------- -------------- -----------

DIRECTORS
Austin C. Dowling (70) Retired; Director, The Thai Capital Class III 3
1002 E Long Beach Boulevard Fund, Inc., since 1990; Director, The Director since
North Beach, NJ 08008 Singapore Fund, Inc., since 2000. 1992

Martin J. Gruber (64) Professor of Finance, Leonard N. Stern Class I 3
229 South Irving Street School of Business, New York University, Director since
Ridgewood, NJ 07450 since 1965; Director, The Thai Capital 1992
Fund, Inc., since 2000; Director, The
Singapore Fund, Inc., since 2000;
Director, SG Cowen Income & Growth
Fund, Inc., from 1986 to 2001; Director,
SG Cowen Opportunity Fund, from 1987 to
2001; Director, SG Cowen Standby Reserve
Fund Inc., from 1985 to 2001; Director,
SG Cowen Standby Tax Exempt Reserve Fund
Inc., from 1986 to 2001; Trustee,
Deutsche Asset Management BT Family of
Funds, since 1992; Trustee, C.R.E.F.,
since 2001; Trustee, T.I.A.A., from 1996
to 2000.

THE JAPAN EQUITY FUND, INC.
----------------------------------------------------------------------
INFORMATION CONCERNING DIRECTORS AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------

David G. Harmer (59) Executive Director, Department of Class II 3
4337 Bobwhite Court Community and Economic Development for Director since
Ogden, UT 84403 the State of Utah, since May 2002; 1997
Chairman, 2K2 Hosting Corporation, from
April 2001 to April 2002; President,
Jetway Systems, a division of FMC
Corporation, from 1997 until 2001;
Director, The Thai Capital Fund, Inc.,
since 2000; Director, The Singapore
Fund, Inc., since 1996.

* Hiroshi Kimura (49) Chairman and President, Daiwa Securities Chairman of 1
One Evertrust Plaza Trust Company, since July 2001; Director the Board and
Jersey City, NJ 07302-3051 and Senior Vice President of Daiwa Class I
Securities Trust Company, from April Director since
1999 to June 2001; Associate Director of 2001
Daiwa Europe Bank, from April 1996 to
March 1999.

Oren G. Shaffer (59) Vice Chairman and Chief Financial Class II 3
7331 Tilden Lane Officer of Qwest Communications Director since
Naples, FL 34108 International Inc. since July 2002; 2000
Executive Vice President and Chief
Financial Officer of Ameritech
Corporation, from 1994 to 2000;
Director, The Thai Capital Fund, Inc.,
since 2000; Director, The Singapore
Fund, Inc., since 1997.

OFFICERS

Shunsuke Ichijo (49) Chief Executive Officer and Director President of --
7-9, Nihonbashi Daiwa SB Investments since 1999; General the Fund since
2-chome, Manager of International Division of 2000
Chuo-ku, DICAM Tokyo since 1996
Tokyo
103-0027 Japan

John J. O'Keefe (43) Vice President and Treasurer of The Thai Vice President --
One Evertrust Plaza Capital Fund, Inc. and The Singapore and Treasurer
Jersey City, NJ 07302-3051 Fund, Inc., since 2000; Vice President of the Fund
of the Fund Accounting Department of since 2000
Daiwa Securities Trust Company since
2000; Assistant Controller for Reserve
Management Corporation from 1999 to
2000; Accounting Manager for Prudential
Investments from 1998 to 1999; and
Assistant Vice President of Daiwa
Securities Trust Company from 1990 to
1998.

Judy Runrun T. Kushner (37) Secretary of The Thai Capital Secretary of --
One Evertrust Plaza Fund, Inc. and The Singapore the Fund since
Jersey City, NJ 07302-3051 Fund, Inc., since 2000; Vice President 2000
of Daiwa Securities Trust Company since
2000; Assistant Vice President of Daiwa
Securities Trust Company from 1998 to
2000; Financial Analyst of Canon USA
from 1997 to 1998.

Laurence E. Cranch (55) Assistant Secretary of The Thai Capital Assistant --
200 Park Avenue Fund, Inc. and The Singapore Secretary of
New York, NY 10166 Fund, Inc., since 1992; Partner in the the Fund since
law firm of Clifford Chance US LLP since 1992
1980.

------------------------
1 "Fund Complex" includes the Fund, The Thai Capital Fund, Inc., The Singapore
Fund, Inc. and other investment companies advised by SCB Asset Management Co.,
Ltd., Daiwa SB Investments (HK) Ltd., DBS Asset Management (United States)
Pte. Ltd., Daiwa SB Investments (Singapore) Ltd., Daiwa SB Investments (USA)
Ltd., Daiwa SB Investments Ltd. or their respective affiliates.

* Directors so noted are deemed by the Fund's counsel to be "interested persons"
(as defined in the U.S. Investment Company Act of 1940, as amended).
Mr. Kimura is deemed an interested person of the Fund because of his
affiliation with Daiwa Securities Trust Company, an affiliate of the Fund's
investment adviser, Daiwa SB Investments Ltd.

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

Shunsuke Ichijo
PRESIDENT
John J. O'Keefe
VICE PRESIDENT AND TREASURER
Judy Runrun T. Kushner
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 US 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.

ANNUAL REPORT
OCTOBER 31, 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.