The outlook for the Japanese economy is less clear than it has been for a while. Growth in the industrial sector is certainly slowing, albeit from a relatively high level. Weak manufacturing orders and rises in stocks of unsold producer goods are among the key factors undermining the index of leading indicators. However, consumer indicators are mostly improving. In that respect at least, the temporary dip back into deflation is positive, as it will boost real household incomes, but the weakness of wages and bonuses remains a concern.
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