Japan - Best of the G7 (Sep 09)

The Japanese economy posted the strongest rebound in the G7 in Q2, but was also first into recession and had previously suffered the sharpest falls in activity. Massive amounts of spare capacity will keep investment weak, while the pickup in consumer spending has been flattered by government stimulus measures. The upturn is therefore likely to falter if, as we expect, the global recovery disappoints and deflationary pressures at home continue to build.