No joke. In June 2002 most analysts whatever their salt was worth agreed Japan's decade-plus long economic recession was over. Yet throughout 2003 they nervously watched one Tankan survey after another, then sighed relief. The recovery, they said, was real. In February 2004, they hailed Japan's resurgence, which by now was sporting its fastest GDP growth since the bubble burst in1989. At long last, Asia's first 'miracle' economy was reborn. So, Hallelujah.

One year on and these same analysts are suddenly silent. Conspicuously. Why? Because Asia's biggest and the world's second-largest economy is reeling again. That's right: it's coughing and spluttering and lurching. And some analysts are now saying privately, of course that Japan could again spiral into the quagmire of its 13-year downturn. So much, then, for Junichiro Koizumi, the fashionable, self-styled reformist prime minister. Worse, his bold claims of pushing through his now infamous "no gain without pain" panacea for Japan's sustained economic upswing have been egged.

Take the leading indicators of confidence, and never mind the Tankan hyperbole: the benchmark Nikkei-225 index closed 2004 at 11,488.76, up 7.6%, after hitting a low of 10,299.43 and a high of 12,195.66. The broader TOPIX index of all First Section shares ended 2004 at 1,149.63, up 10.15%, after a low of 1,017.84 and a high of 1,225.97. Today? Neither have advanced as spectacularly as analysts had predicted.

What gives? Uncertainty renewed. And confidence in the Koizumi government's economic management is sapping fast. Sure, jobs are looking up but only marginally better than this time last year. Unemployment is still hovering at 4.6%. One of Japan's most serious problems lies at two fronts: trade, and China. That's another story for another time. Still, if the new round of neo-nationalist taunts by Chinese, propagated and promoted by Beijing, against Japan are a sign just where Sino-Japanese relations are headed, they're sure to also add to the salted wounds of Liberal Democratic Party hardcore nationalists over Japan quickly losing ground China on world trade. And the target of their disenchantment will be Koizumi, who has all but vanished from his hogging the limelight early on.

Questionable methods

The big problem for Japan lies in just what the Koizumi government is doing to give analysts a much clearer and a more transparent picture of not just its policy framework and economic policies but of the methods it uses to calculate vital economic data with which to predict the economy's upsides and downsides. Yet it's too quick to emphasise, instead especially given the absence of any real and biting reforms that Japan's economic uptrend remains firmly rooted in its export economy's performance. That could be another furphy.

Tokyo claims there were six consecutive GDP growth increases the July-September quarter saw. But revised calculations cast serious doubt on that figure. Worse, there are widening disparities in GDP growth predictions. Example: Industrial production numbers for last October suggested the economy was far weaker than the mid-range estimate by 10 research institutes surveyed by Jiji Press, a Japanese news service. Their forecasts ranged from a drop of 1% to a rise of 1.5%. And a Dow Jones Newswires' survey of economists suggested the jobless figure to remain unchanged. But economics minister Heizo Takenaka brushed off the negativity. While acknowledging the gap in economic forecasts something he said he'd closely watch he nonetheless pressed the case that Japan's economy was "adjusting in an upward trend". Yet other private sector economists say Japan's economy has come to the end of what has been a six-quarter expansion, supported partly by exports to China and the US.

What's more mystifying, though, is that last November Takenaka admitted that the figures put out by the government, or even how private sector economists calculate them, seem hard to follow. True, governments can, and do, adjust their methods for compiling economic data. And there's no transparency here. In Japan, the GDP numbers announced for the July-September quarter showed an annual rate of growth of just 0.3%. That's a big drop from the earlier 1.1% number Tokyo produced. Soon afterwards, though, a new calculation showed a negative figure for GDP. Still, that didn't deter the government from holding steadfast to its "bullish view" on the economy despite Japan's real GDP having in fact shrunk in the July-September quarter, especially with the adoption of a new GDP data calculating method. It's simply befuddling.

And here's the rub. The same method was used for the October-December quarter. But even before the Dec 8 announcement, the Koizumi cabinet was already projecting Japan's real GDP growth for that term to shrink by an annualised 0.1%. One thing's clear: it is not the first economic contraction in seven quarters but two at least. If the new system is aimed at improving the accuracy of the GDP deflator, which is the primary barometer for inflation or deflation, it's showing, clearly, that the Japanese economy is looking down the barrel again.

It's also no help to the Koizumi government or perhaps it is when Tokyo is so inept when on the one hand the United Nations now says the world economy's expansion is slowing but on the other hand the Paris-based Organisation for Economic Cooperation and Development (OECD) says Japan can expect a moderate expansion of its economy to 2.1% in 2005 and 2.3% in 2006. The OECD's measurement is based on a price-adjusted model for real GDP. It has gotten plenty wrong in the past; it'll be proven wrong on Japan this time too. But here's the irony: even by the OECD's calculation, its newest prediction for the Japanese economy marks not an acceleration but a deceleration from the 4% growth predicted in 2004.

NOTE: Feb 16, 2005: Japan's gross domestic product unexpectedly shrank in the fourth quarter, by an annualised 0.5%. And revised figures released today also showed a contraction in the previous period, throwing the economy into its fourth recession since 1991. The writer predicts major Japanese companies will now shred their profit forecasts not for this half but for the full fiscal year.

MANJIT BHATIA, an academician and writer, is also research director of AsiaRisk, a political, economic and risk analysis consultancy in Australia. He specialises in international economics and politics, with a focus on the Asia-Pacific.