Despite much fanfare it appears that the Japanese government is losing its battle to refloat its economy and lift inflation

Despite much fanfare it appears that the Japanese government is losing its battle to refloat its economy and lift inflation. The government may believe that Japan is 'back and on track', but global bond investors think differently, with government bonds declining and inflation linked bonds leveling out. Interestingly, the entire yield curve has shifted down since the announcement of Prime Minister Abe's 'third arrow' and instead of lifting expectations about the growth profile, it appears to have done the opposite. Indeed, the government's three arrow policy has done everything other than solve the structural problems of the ageing demographics, restrictive industrial relation system and lack of economic efficiency. Accordingly, without a further boost to the Yen or more fiscal stimulus it is hard to see how Japanese inflation will rise towards its +2% target. The missing transmission channel is the most intriguing omission from the plan. (VIEW LINK)