To some, the continued fall in output last quarter is proof that Abenomics has failed. However, the economy has actually done fairly well over the past two years considering the strong demographic headwinds and the drag from this year’s sales tax hike. Japan’s economic problems are still far from being solved but that is no reason to abandon the fight against deeply-ingrained deflation with all its associated economic costs. On the contrary, more efforts to lift wage growth and more courageous structural reforms are still needed.
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