Japan has been conducting the most audacious monetary experiment in modern economic history, but there are plenty of signs the experiment has not been audacious enough. When Haruhiko Kuroda, governor of the Bank of Japan, convenes the bank's policy meeting on Thursday, he will have to convince his colleagues that it's time for another round of shock-and-awe.
It's been 179 days since the last time BOJ took the markets by surprise. On Oct. 31, Kuroda rebooted Japan's quantitative-easing program to the tune of $700 billion. That massive injection is a key reason why the Nikkei is now at 15-year highs.
But even as investors have bid up Japanese stocks, deflation has made an untimely return. The BOJ's main gauge showed inflation slowing to zero in February. In March, household spending dropped 2.9 percent, the 11th straight monthly decline. Wage gains remain stingy, a sign that spoils from the weak yen aren't trickling down. And the disappointment over the slow pace of Prime Minister Shinzo Abe's structural reform program is so widespread that Fitch's decided Monday to downgrade Japan's credit rating to "A" from "A+".
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