This past spring may well be remembered as the "high water mark" of Abenomics.
There's no question the aggressive economic program – huge stimulus and monetary policy measures, with an inflation target – launched by Japanese Prime Minister Shinzo Abe made its mark.
Japan's economy surged by 6.7 per cent in the first quarter of the year, and the latest reading on inflation showed there is indeed inflation, of 3.4 per cent, notable in that it's not deflation.
But economists now wonder whether Abenomics is now "coming unstuck," as Kit Juckes, the chief of foreign exchange at Société Générale, put it Tuesday after the latest numbers on Japanese unemployment and retail sales.
For the record, this question has been asked on and off with the ups and downs of Abenomics, but Wednesday's analysis by observers was notably harsh, and definitive.
"Abenomics is stuttering, as the consumption tax increase bites and real incomes are eroded by rising prices," Mr. Juckes said.
His comments came as the latest readings showed unemployment now up to 3.7 per cent, and June retail sales up by just 0.4 per cent, below what observers had expected.
That latter showing, as Bank of Nova Scotia pointed out, put the quarter-over-quarter level of retail sales down by more than 7 per cent, or about 28 per cent annualized, after the April sales tax increase.
As for the jobless rate, it was higher than the 3.5 per cent projected by economists, the result of an expansion in the labour force as more people declare they are hunting for jobs.
"There is mounting evidence that this spring will go down as the high water mark for Abenomics," Scotiabank's Derek Holt and Dov Zigler said in a research note.
"The main economic objectives of Abenomics, namely higher growth and higher inflation, were seemingly being realized," they added.
"Digging beneath the surface, however, the growth and the inflation were to some good extent attributable to the optical illusion of a sales tax hike. Higher CPI due to pass-through from currency depreciation had a similar effect on inflation. How growth and inflation will look once these transitory factors shape out is a whole other matter. We're already seeing that the Japanese consumer has been sizeably weakened by the sales tax hike"