Fiscal stimulus as ever will be followed by another fiscal stimulus plan.So expect some sort of fusion of monetary and fiscal stimulus to drag Japan clear of the dire position it finds itself in. Abe recently has spoke of more fiscal stimulus ($278Bn in hopes of increasing GDP by 1.3%) but this is not nearly enough, he definitely has more to do. Has the BoJ come to the end of its moves? Has it already pushed the limit? What is left is more uncharted territory. Japan the economy where hope never happens shows us the limitations of monetary policy. This time the markets needs it and means it, expectations are now very high. There will be huge pressure on the BoJ at the next meeting to give us more stimulus. Everything points to more stimulus, we have a strong Yen, weak GDP and poor underlying inflation. For all the heavy lifting done by the BoJ there is no defined driver of the economy.

Has the Yen`s strength has been a sort of shock absorber for the global imbalances ? Has Japan simply imported the bulk of global deflation ? All Japan has given us for many years is slow growth, very slow growth or contraction. Add to this the continued strength of the Yen (+16% vs $ and +18% vs RMB in 2016) a bounce in the oil price and uncertain equity markets which have left CEO`s less optimistic. Private Consumption makes up around 60% of GDP. There was a small increase in Private Consumption of 0.2% but this had slowed from 0.6% in the previous quarter. Manufacturers despite enjoying record profits do not see it as sustainable. The main reasons behind the appalling data were weak exports and a sharp decline in business investment. Commentators are saying the economy has simply stalled. Japan`s economy on an annualized basis grew 0.2%, a dramatic slowdown from 1.9% in the previous quarter.

Download stuart beavis