For the first time in a long while it is possible to build a reasonable case for worrying about the Japanese economy: our monthly review of the latest data finds causes for concern among both households and businesses. Consumers say they are less confident about employment prospects and less willing to buy durable goods. This is hard to square with the better news from the labour market, but the forward-looking indicators here are softening too. And the manufacturing PMI has fallen below the 50 level, led by weakness in domestic orders. Nonetheless, it is no surprise that the economy is starting to flag in the fifth year when GDP growth has been at or above Japan’s relatively low sustainable rate. The single most reliable indicator – the Tankan survey – suggests that the economy is on course for a “soft” rather than “hard” landing.
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