The latest figures on Japan’s economy were downbeat. We have been forecasting a contraction in Q3 GDP since June and nothing that has happened since has shifted that view. Industrial production has plunged and is set to contract further in September and in the fourth quarter. Although there were some encouraging figures on retail sales in Friday’s data dump, we doubt that consumer fundamentals will be able to support continued spending at this level for the rest of the year. Looking ahead, we think there is an increasing chance there will be a further contraction in Q4 too.
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