Japan's problems could be more entrenched than Q2 has indicated

Japan's economy expanded 0.9% in the second quarter compared to the previous one, lifting hopes that it may be recovering after four quarters of contraction.

But while many other countries have similarly reported better than expected economic data, Japan’s problems are arguably more entrenched. Much of that growth boost may turn out to be the result of government spending, which is only now kicking in. By rich world standards, that spending is aggressive. But it comes against a background of previous lifelines which have singularly failed to lift the economy. Debt to GDP ratio stands at around 220% according to the IMF, about twice Italy’s, Europe’s most profligate nation. By its nature, public spending cannot continue indefinitely. The...