Demand from Japan may already be helping to rekindle economic activity in other parts of Asia. Japan, of course, could still be blown off the path to lasting recovery. If the yen's recent appreciation against the U.S. dollar continues, for example, profit growth at the country's mighty exporters will take a beating. A turnaround could also be cut short by a policy misstep such as the sales-tax increase in 1997 that snuffed out growth and sent the economy into a tailspin. The fact that it comes on top of Yen10 trillion in public spending already in this year's budget may spook bond investors by adding to the government's mounting debt.
Observers see it as a price the government is willing to pay.
But it's not yet on an upward trend, either. The positive data is changing some attitudes, though. That means any pick-up in consumer demand will likely lead to a further rise in production. Consumer confidence has been shaken in the past year by the failures of major banks, record unemployment and falling income levels. But here, too, there are tentative signs of a rebound.