The latest data have done little to assuage doubts about the strength of the recovery. The economy contracted sharply in Q2 and industrial production and retail sales remained sluggish at the start of the third quarter. The labour market has softened lately, too. Admittedly, business surveys still point to a rebound in activity in coming months. But the current weakness of demand suggests that the Bank of Japan still has more work to do to reach its 2% inflation target.
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