Japan economy has not recovered on the scale it should have done

Japan's economic recovery has proved to be anaemic in 2009 and it is a great surprise the market has underperformed its Western counterparts and the Asian markets.

The economy has clearly recovered but not on the scale it should have done. Real GDP growth initially came in at +4.8% in the third quarter but was revised down subsequently. My recent trip to Japan highlighted the fragility of the domestic economy and this has been borne out by the recent Tankan survey of non-manufacturing Japan where sentiment is still sluggish. This is partly offset by better sentiment indicators within the manufacturing sector such as automobiles and semiconductors. Some second round effects are also being seen in the economy such as a pick up in manufacturin...