Above-consensus growth may still not be good enough

The disappointing data for the second quarter have prompted us to revise down our forecast for Japan’s GDP growth in 2010. At the same time we are nudging our 2011 forecast higher, and our numbers for both years are probably above-consensus (certainly so for next year). But the rebound in economic activity from Japan’s relatively early and deep recession will still not be sufficient to bring a permanent end to deflation or to put the public finances back onto a safe path.