Figures just released suggest that the Japanese economy shrank by 0.4% in Q4 2015, however, initial reports for Q3 reported a shrinkage of 0.8% which was revised to an expansion of 1% upon receipt of more comprehensive figures.

Japan had hoped that a weakening of the Yen would make its exports more competitive and lead to improved growth, However, this strategy looks doomed – as far as Q1 2016 goes, anyway – since the panic in global stock markets has seen investors rush to buy Yen, a safe haven currency according to economic folklore, As a consequence, the Yen has fallen from 120.6 to the Dollar at the New Year, to stand at 114.7 currently, having recovered from a low of 111.4. Last year, at this time, the Yen was hovering around the 120 mark, so any upside from the currency have been short-lived – for the record, last year's peak value saw the Dollar buying 125.6 Yen, but it was downhill ever after (June 2015 at about the height of the Chinese stock market crash, if memory serves).

The Bank of Japan's gambit to introduce negative interest rates did devalue the Yen, but the “gains” (or should it be losses?) were short-lived as investors, spooked by the Chinese stock market crash, ran for cover to the Yen, pushing it higher. It is likely that a sustained stock market rally will lead to a sell off of Yen, weakening the currency, but until recently, sentiment in global markets was distinctly Bearish.

The Japanese government is keen to restore inflation to the Japanese economy as a bulwark against deflation in the economy which acts as a brake to national consumer demand. The target is 2%, but the current level is 0.2% having weakened from a previous reading of 0.3%. Partially, the weak price for oil and gas is easing inflationary pressure in Japan since the nation needs to import petrochemicals (notably LPG) for energy production, since much of Japan's nuclear capacity remains off-line following the 2011 tsunami.