Japan: Problem is with the growth potential - BBH

Research Team at BBH, notes that the Japan's Finance Minister was quoted saying that deflation is the biggest problem for the Japanese economy which seems to wrong diagnosis of the problem. 

Key Quotes

“The problem is growth potential.  The BOJ estimates that potential growth is only 0.2%.  The challenge is not that Japan is expanding below its potential, but that its potential is too low.  Today's data confirms the economy is expanding.  The preliminary manufacturing PMI rose to 50.3.  It is back in expansion mode (above 50) for the first time since February.  The All-Industries Activity Index, a proxy for GDP rose 0.3%, a little more than expected.

After bouncing off JPY100 yesterday, the dollar reached almost JPY101.25 in Asia but met sellers that have pushed it back to JPY100.80.  Additional intraday support is seen near JPY100.50.  Japanese markets were closed yesterday, but it appears that institutions were eager to lock in the dramatic backing up of long-term yields that were triggered by BOJ action.”