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Japan still looks troubled. To be sure, the economy recorded a surprisingly strong 4.1% annualized real GDP growth in the first quarter, much of which reflects government spending. Otherwise, the flow of news still points to the same tepid growth that has troubled Japan for more than 20 years now. Four of the last six quarters have shown real declines, including last year’s fourth quarter. This once powerful exporter faces a deficit in its balance of international payments, while spring data releases show industrial production is declining. The country also continues to face the threat of deflation. Consumer prices have risen only because of past fuel price hikes. Now that the cost of a barrel of oil has declined, Japan will likely see aggregate price declines again. The stock market has not missed the point either. It has fallen some 15% since April. The recent downgrade by Fitch in part reflects this economic picture. Still, there are opportunities.

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