Inflation genie remains in its bottle

Japan’s economy probably recorded the sixth quarter of uninterrupted GDP growth in Q2 and the outlook for the third quarter is positive. In fact, the economy remains on track to enjoy the longest expansion since the turn of the century. There are some signs of stronger cost pressures, in particular rapid gains in hourly wages of part-time employees. But the bigger picture is that capacity shortages will have to intensify much further to reach the Bank of Japan’s 2% inflation target